Employee Retention Bonus Agreement | Free Download

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A retention bonus agreement contract allows employers to offer a retention incentive to their employees for not leaving the company for a specific period. This agreement enables organizations to retain top talent by offering incentives in multiple ways, such as an extra paycheck, lump sum money, and ESOPs.


Organizations use a retention bonus agreement for many reasons, including:

  • Discouraging employees from joining a competitor
  • Retaining a key person in a critical project until completion
  • Ensuring the company doesn’t lose top performers during crucial events such as
  • Company restructuring exercises, brainstorming yearly business strategies, drafting
  • Vendor agreements, and planning mergers & acquisitions.

A retention bonus agreement clearly states the relevant terms & conditions allowing employees to comprehend the benefits, obligations, roles & responsibilities, and termination conditions. Read the following guidelines on how to draft an error-free retention bonus agreement:

1. Purpose

It would be best if you state the reason why the company is offering a retention bonus agreement to the employee.


For example- If you intend to retain an employee for the completion of a particular project, you must clearly mention that the employee is bound to put necessary efforts into it.



2. Terms of Agreement

Terms and conditions are the most essential aspects of the agreement. They consist of:

  • Contract span — Start and end date
  • Greement termination clauses
  • Dispute resolution clauses

Scope and Limitations

The scope of the agreement should communicate the following essential points:

  • The participants in the agreement
  • The period of the bonus retention agreement
  • Terms and conditions for contract termination
  • Employee obligations



Employment details

  • Employment period
  • Employee designation for the specified period
  • Work/shift schedule



Organizational structure

  • Employee’s reporting manager details
  • Assigned department/team



Roles & Responsibilities

  • Listing job responsibilities
  • Monitoring and evaluating employee performance benchmark
  • Weekly/monthly deliverables

You can also briefly mention what work ethics, policies, and regulations the employee should adhere to.


Compensation and benefits

  • Mentioning the start and end date for which the employee will receive the compensation & benefits.
  • Remuneration for the given period.
  • Complete details regarding perks and benefits.
  • Disbursal of retention bonus



Retention Bonus

  • The following are the most crucial aspects of a retention bonus agreement:

    Parameters for calculating the retention bonus based on the percentage of the employee’s salary or a lump sum amount agreed between both parties.

  • How and when the retention bonus will be paid — For example on completion of the retention period, at the beginning of the contract period.
  • The terms & conditions for an employee to be eligible for receiving the retention bonus.



Critical employee documents

  • Insurance cover high-risk job profiles.
  • Terms about employee safety and security for the retention period.



This section provides details regarding undesired activities that might attract disciplinary action against the employee. In the worst-case scenario, the employee may be denied the promised bonus.





At the end of the retention agreement document, both parties should mention their name, designation, and venue, along with their signatures.

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