Umakanthan53
Labour Law & Hr Consultant
Katyana
Hr Professional
Rkandadai
Manager-hr
Sogemar
Ir Manager
+3 Others

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Hi all, What are the best practices in the industry with regards to Retention Bonus? Appriciate your inputs... Regards,
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

I am working in US IT staffing company and there is deduction of Rs1000 from my CTC as retention bonus. Retention bonus according to my Salary Annexure states that it will be "Disburse after completion of year as per prorata basis". Now its been 1.2 years working in this organisation and now they are giving me my retention bonus saying that i have been Non productive for this whole period and company has invested a lot on you. As per my knowledge, Retention Bonus is not related to productivity and performance.
Can someone help me ,how can i get my retention bonus back ??
Would appreciate guidance and advice on how to go about this..
Thanks!!

I believe retention bonus is illegal and retaining part of the salary of an employee as bonus us unfair labour practice. Payment of bonus is a statutory requirement and the payment of Bonus should be paid as per the Payment of Bonus Act.
Dear All
Retetion bonus is Nothing it is private legislation made by employer to retain the employees longly in their service since it is private legislate hence it does not have legally valitidy. However for the employees whoever falls within the purview of payment of wages act. Retetion bonus is not authorized deduction as per sec 7(2) of payment of wages act. Therefore deduction by way of retetion bonus is the voilation of payment if wages act. Hence it cannot be legally stand?
Thanks & Regards
V Shakya
HR & Labour Law Advisor

Yes rotified the employee by way of bonus is an illegal activities. Also the voilation of payment of wages Act as explained by Mr. V Shakya in Above post.
Thanks
Devesh Chauhan
Practicing In Accounts Finance & Taxation and Labour Laws

As far as I understand "Employee Retention Bonus" (ERB) is a clever arrangement made by some employers to retain the effective employees with them as a pre-emptive exercise against Corporate Poaching during a crucial period of liquid Labour Market. ERB is an additional payment or a lumpsum 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 retainment 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.

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