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Retention bonus

What is Retention bonus? Employers offer retention bonus to employees who stay on the job for a period or through the completion of a speci...

What is Retention bonus?

Employers offer retention bonus to employees who stay on the job for a period or through the completion of a specific project.

Higher job rotation rate in the industry is one of the reasons forcing companies to offer strategic and innovative ideas and incentives to retain their employees. Retention Bonus is one of such ideas. The Bonus is paid directly to the employee for his/her retention at the company during a certain period of time (normally at a critical time of business cycle, for example, after Tet holiday, after a Long holiday, after birth-giving, etc.). Nowadays, Retention Bonus is becoming a popular and widely applied measures by businesses since there are a large number of sudden changes and critical moments during the course of business. For that reason, companies must offer a special-event-oriented incentive to retain their talented employees. M&A is a major reason to retention bonus.

Fact has proven the effectiveness and usefulness of retention bonus.

Though, retention bonus is not a panacea. Result of a survey indicated that 10% of annual income was from bonus for non-management employees while that rate for management employees was 50%. Companies tend to offer higher rate of bonus for key personnel as there are fewer number of them compared to normal employees. in some states, the rate may range from 25% to 50% depending on the position, years of service (seniority) and so on.

Retention bonus is normally paid at the end of a business cycle since its effect is the highest. Such a period for retention bonus typically is less than half a year, and normally related to a specific project. But the project itself may last for more than a year. In this case, the best solution is to offer various retention bonuses as incentives during a year, each installment payment of a small percentage. And final bonus is paid after the end of the project to create the best effect.

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