Hi all, What are the best practices in the industry with regards to Retention Bonus? Appriciate your inputs... Regards,
From India, Hyderabad
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17From India, Hyderabad
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Dear Rkandadai,
Retention Bonus is one of the important tools that are being used to retain employees. It is an incentive paid to an employee to retain them through a critical business cycle.
Retention bonuses are becoming more common in the corporate world because companies are going through more transitions like mergers and acquisitions. They need to give key people an attractive incentive to stay on through these transitions to ensure productivity.
Non-management employees generally receive about 10 percent of their annual salaries in bonuses, while management and top-level supervisors earn an additional 50 percent of their annual salaries. While bonuses based on salary percentages are the generally used, some companies choose to pay a flat figure.
In some companies, bonuses range from 25 percent to 50 percent of annual salary, depending on position, tenure and other factors.
Retention bonuses are generally vary from position to position and are paid in one lump sum at the time of termination. However, some companies pay in installments as on when the business cycle completes. A retention period can run somewhere between six months to three years. It can also run for a particular project.
A project has its own life span. As long as the project gets completed, the employees who have worked hard on it are entitled to receive the retention bonus. For example, the implementation of a system may take 18 months, so a retention bonus will be offered after 20 months.
For example Mphasis-an EDS co, is providing cash component based retention bonus plan for its employees. This is mainly to retain good employees and provide them a cash incentive to keep them motivated.
I hope this brief description helps you to understand the concept of RETENTATION BONUS.
KATYANA
From India, Gurgaon
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Retention Bonus is one of the important tools that are being used to retain employees. It is an incentive paid to an employee to retain them through a critical business cycle.
Retention bonuses are becoming more common in the corporate world because companies are going through more transitions like mergers and acquisitions. They need to give key people an attractive incentive to stay on through these transitions to ensure productivity.
Non-management employees generally receive about 10 percent of their annual salaries in bonuses, while management and top-level supervisors earn an additional 50 percent of their annual salaries. While bonuses based on salary percentages are the generally used, some companies choose to pay a flat figure.
In some companies, bonuses range from 25 percent to 50 percent of annual salary, depending on position, tenure and other factors.
Retention bonuses are generally vary from position to position and are paid in one lump sum at the time of termination. However, some companies pay in installments as on when the business cycle completes. A retention period can run somewhere between six months to three years. It can also run for a particular project.
A project has its own life span. As long as the project gets completed, the employees who have worked hard on it are entitled to receive the retention bonus. For example, the implementation of a system may take 18 months, so a retention bonus will be offered after 20 months.
For example Mphasis-an EDS co, is providing cash component based retention bonus plan for its employees. This is mainly to retain good employees and provide them a cash incentive to keep them motivated.
I hope this brief description helps you to understand the concept of RETENTATION BONUS.
KATYANA
From India, Gurgaon
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I am working in a US IT staffing company, and there is a deduction of Rs1000 from my CTC as a retention bonus. The retention bonus, according to my Salary Annexure, states that it will be "disbursed after completion of the year on a prorated basis." Now, it's been 1.2 years working in this organization, and now they are giving me my retention bonus, saying that I have been non-productive for this whole period and the company has invested a lot in me. As per my knowledge, a Retention Bonus is not related to productivity and performance. Can someone help me on how I can get my retention bonus back? I would appreciate guidance and advice on how to go about this. Thanks!!
From India, Noida
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From India, Noida
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I believe a retention bonus is illegal, and retaining part of an employee's salary as a bonus is an unfair labor practice. Payment of a bonus is a statutory requirement, and the bonus should be paid as per the Payment of Bonus Act.
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From India, Mumbai
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I have corrected the spelling and grammar errors in your text and ensured proper paragraph formatting. If you need further assistance, feel free to ask!
From India, Mumbai
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Dear All,
Retention bonus is not just a private arrangement made by an employer to encourage employees to stay longer with the company. It is a private agreement and does not hold legal validity. For employees covered under the Payment of Wages Act, retention bonus cannot be deducted as it goes against Section 7(2) of the Act. Therefore, any deduction in the form of a retention bonus would be a violation of the Payment of Wages Act. Consequently, it would not hold up legally.
Thanks & Regards,
V. Shakya
HR & Labour Law Advisor
From India, Agra
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Retention bonus is not just a private arrangement made by an employer to encourage employees to stay longer with the company. It is a private agreement and does not hold legal validity. For employees covered under the Payment of Wages Act, retention bonus cannot be deducted as it goes against Section 7(2) of the Act. Therefore, any deduction in the form of a retention bonus would be a violation of the Payment of Wages Act. Consequently, it would not hold up legally.
Thanks & Regards,
V. Shakya
HR & Labour Law Advisor
From India, Agra
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Yes, notifying the employee through a bonus is an illegal activity. It is also a violation of the Payment of Wages Act, as explained by Mr. V. Shakya in the above post.
Thanks,
Devesh Chauhan
Practicing in Accounts, Finance & Taxation, and Labour Laws
From India, Basti
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Thanks,
Devesh Chauhan
Practicing in Accounts, Finance & Taxation, and Labour Laws
From India, Basti
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As far as I understand, "Employee Retention Bonus" (ERB) is a clever arrangement made by some employers to retain effective employees with them as a preemptive exercise against Corporate Poaching during a crucial period of a liquid Labor Market. ERB is an additional payment or a lump sum monetary reward over and above the regular salary and offered as an incentive to keep a key employee on the job, particularly during a crucial business cycle or a crucial production period.
The use of the word "bonus" in the nomenclature of ERB does not have any relevance to the statutory bonus payable under the Payment of Bonus Act, 1965, or the production bonus payable under any production-related incentive scheme. Thus, it is "paid" to the employee by the employer out of his own necessity for retention rather than being "earned" by the employee by dint of his additional work to the organization.
The example cited in the post of VICSX001 is quite the opposite of ERB, as I explained, and a kind of perpetual servitude based on the subjective considerations of the employer and as such the very contract of employment would be void to that extent.
From India, Salem
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The use of the word "bonus" in the nomenclature of ERB does not have any relevance to the statutory bonus payable under the Payment of Bonus Act, 1965, or the production bonus payable under any production-related incentive scheme. Thus, it is "paid" to the employee by the employer out of his own necessity for retention rather than being "earned" by the employee by dint of his additional work to the organization.
The example cited in the post of VICSX001 is quite the opposite of ERB, as I explained, and a kind of perpetual servitude based on the subjective considerations of the employer and as such the very contract of employment would be void to that extent.
From India, Salem
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