I’ll Give You a Reason to Stay--Using Retention Agreements in Retaining Key Personnel During Business Changes

March 11, 2025 (4 min read)

When an employer contemplates an acquisition, merger, or other corporate transaction, the employer often wants to be sure that key employees remain during (and often for a time after) the transition. Retention agreements are useful for this purpose and can provide for a retention bonus, enhanced severance, equity (including stock options or acceleration of such options), or a combination of these types of compensation or other benefits to incent the employee to stay, even when the future is blurred.

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Retention Bonus and Change in Control Agreement
Learn how retention bonuses can be a useful tool when there is a particular concern that the departure of key employees could adversely impact a company's ability to achieve project-based or strategic goals, successfully grow the business, or maintain a competitive advantage. Retention bonus agreements generally provide for a financial benefit that is earned by the employee only if they remain employed by the company for a specified retention period.

Executive Retention Bonus (Letter Agreement)
See how retention bonuses (without a change in control) typically are a percentage of the executive's base compensation (often 10-50%). They can be used where the individual is performing an important function/project that can’t be upset if they choose to terminate employment mid-project.

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Employee Benefits & Executive Compensation