Retention Bonus and How It Works

What is a Retention Bonus and How It Works – An Ultimate Guide

If you are an employee in a massive company, you may be familiar with the term retention bonus. Since many of you wanted the answers to some questions regarding this employee retention bonus, we have prepared this guide. When a company is in a tough situation, employees are most likely to leave in the first place. In those times, the company offers this bonus to keep the top employees without letting the competitors grab them. So, read the guide and find more details related to this bonus. 

retention bonus

The company can benefit from these, providing this retention bonus to the employees even if it is a cost. But as an employee, before accepting this retention bonus offer, there are some factors you should consider to decide whether this offer is worth accepting. Wanna know about those things? Then dive into the guide and find answers for all your issues. 

What is a Retention Bonus

What is a retention bonus? This is the first question that we will answer in this guide. It is a payment that includes a lot of money to make an employee stay with the relevant company longer without leaving. 

What is a retention bonus

This bonus includes a lump of money, and the bonus percentage will be 10% to 25% of the employee’s basic salary. Since this is a payment processed by the company to a specific employee to make him stay some specific time in the company, the bonus will be the decisive factor determining the duration of the employee’s stay there. 

If the company is small, this kind of bonus is rarely processed, but if you work in a larger company with twenty thousand-plus employees, this kind of bonus is very common. And also, these bonuses will not be offered to employees in lower positions in the company hierarchy. Still, the top employees or the employees who are the most critical to the company will be given these bonuses to make them stay longer in the company. 

And these bonuses will be offered to the top-level employees when the company is in a stressful situation to motivate them to work harder without leaving the company for their good. And also another reason the company provides this bonus to its employees is to prevent competitors from fishing employees from the company. 

How Does an Employee Retention Bonus Work

Since you know this bonus, are you wondering how it works? Wonder not; let us explain everything. As we said earlier, this is not a bonus given to the employees for their performance. But this is like an incentive given to the employees to make them stay in the company even at the hardest times. 

How Does an Employee Retention Bonus Work

When the company provides this retention incentive or bonus, the employees who receive it must sign a contract agreeing to a specific duration to remain in the company. Once the employee agrees to stay in the company for a certain incentive, the retention incentive will be given to him as a lump sum. 

Some of the factors that decide the employee retention offer for employees in the company are the salary of the competitive companies they like to offer, the financial state of the company, etc. most of the companies provide 10% to 15% bonus from the basic salary of the employee, but it can increase up to 25% maximally. 

Advantages of Retention Bonuses

These bonuses are very advantageous for the companies because the companies offer these bonuses to keep their top-level employees in the company by encouraging them to work. Therefore, even if the company has to pay a bonus like this retention incentive, the advantages the company will enjoy doing will be much higher. Therefore, let us see what advantages the company can have by offering these retention incentives. 

Advantages of Retention Bonuses
  • As we stated above, providing these retention commissions is not related or connected with an individual’s work performance. But if the company gives the top employees a bonus like this, it might encourage them to work, increasing productivity. 
  • Establishing the employee’s loyalty to the company is another benefit that the company will obtain from these bonuses. Because once the employee signs the contract agreeing to stay a longer time in the company by accepting the bonus employee retention offer, the employee will not leave the company but will remain loyal. 
  • Offering these bonuses will help the company create an employee team that the company can rely on even at the hardest moments. Because of this, the company will increase its profit thanks to its dedicated employee group. 
  • By offering this bonus to the employees, the company can let them feel that it values and needs them, etc., making them work putting their full effort into the company. 
  • Suppose the company succeeds in keeping the top-level employees in the company through this bonus. In that case, it will help the company to maintain its name and goodwill while attracting the best investors. 
  • Since this is a one-time cost that the company has to bear, it is not a big deal for the company. If the salary is increased, its cost has to be borne all the time, but this is a one-time payment that the company has to provide the employee to make him stay. 

Should I Accept Retention Bonus

Even though the company has offered you this bonus offer to keep you in the company for some longer time, it is in your hands whether to accept it or not. But how can you decide? The only way to do this is to measure the benefits of the company’s bonus and the cost you have to bear if you accept this offer and stay in the same company. 

Should I Accept Retention Bonus

If the benefit is higher than the cost, you can consider accepting this offer. But if the cost is too much, you can think again before accepting the offer. So, let us know which factors need to be considered to decide whether you should accept this bonus. 

  • If the benefits you can obtain through another job are higher than this incentive, you can abandon this employee retention offer. But you should know how to decline a job offer politely. The salary and the benefits that another company provides are much better, and accepting the retention of the current company is a cost for you. 
  • You need to check whether you can go higher in your career path if you stay in this job. If you are unsure about your career’s growth or development with your current company, you can abandon the offer. But if the company offers growth opportunities, you can stay accepting the offer. 
  • Next, consider whether you enjoy your work in your current company. If you are unhappy during your work time, then it is not suitable to stay at that company any longer. If you accept the retention offer of the company, then you have to wait much longer to be unhappy. Therefore consider the cost of being unhappy at your workplace before accepting the offer. 

Do I Have to Pay Back My Retention Bonus

The next issue you have about your retention offer is, “do I have to pay back my retention bonus.” You accept this offer agreeing to stay a certain time in the company with some other conditions. But if you break the agreement and resign from your company before the agreed time is over, you will pay the full amount of the employee retention offer. This is how this bonus works. 


From what you have read above, do you think it is worth accepting the employee retention bonus from a company to stay longer after considering the costs you have to dedicate if you accept the offer? If it’s worth giving up all the other opportunities, you can accept the retention offer and stay longer in the company. Also, consider the time you need to stay in the company because if the company is short-term, you will face frictional unemployment when the agreement ends and must leave.

Henry Sterling
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