Who is eligible for the retention bonus?

A retention bonus is eligible to employees after they sign an agreement with their employers. Employees who stay for the period specified in the agreement are eligible for the retention bonus. Some employers clearly state further requirements, such as satisfactory performance. Others can use vague terms, like "sole discretion," which you need to discuss beforehand.

Are retention bonuses taxable?

Retention bonuses are taxable, but they differ from annual salaries because they're considered supplemental wages. For this reason, you need to assess the tax rate and method before accepting a retention bonus agreement.

What is a typical retention bonus agreement?

Typical retention bonuses can be anywhere from 10% to 25% of the base salary, depending on the industry. Your employer might also choose to pay a flat rate, such as $5000. A retention bonus is commonly paid as a lump sum amount, but some employers may break it down to ensure their benefits in case you're dismissed.

Can you decline a retention bonus?

You can initially delay responding to a retention offer till you negotiate more benefits. If the offer doesn't seem promising altogether, you can decline it and request a higher fixed compensation for staying. Otherwise, you're free to start a job hunt.

What are Retention Bonus Agreements? Should You Sign One?