Retention bonuses are commonly used in the corporate world where there is high competition for key players.
A retention bonus is a substantial sum of money paid to an employee. The value of these
bonuses can range from 10% to 20% of an employee's base pay.
This is a one-time payment awarded in addition to the regular base salary of the
employee.
Depending on the agreement, the amount can be divided over a particular time period
rather than given as a lump sum.
These bonuses are beneficial to an employer. They are generally **more cost-effective
than an overall pay rise**.
They are usually used to encourage a valuable employee to stay motivated to remain
within an organization.
This type of bonus is generally only offered to a very small percentage of the workforce
and are usually reserved for those in higher management or executive positions.
If an employee is at risk of being headhunted by a competing firm, a retention bonus may
encourage them to remain loyal to the company.
Retention bonuses are used across a range of industries.
However, they are more commonly used in larger companies and offered to high-level employees and those
with specialized skills or knowledge.
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