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[W481]What Is Employee Retention

by Mark Warner, Mar

An Employee Retention Agreement is a legal contract entered into by an employer and a key employee whose services the company desires to retain. When employees know that their company might be acquired, they understand that their employment security may be in danger. In these situations, companies who want to ensure these employees' continuing loyalty and commitment sometimes feel that it is in the best interests of the company and its stockholders to provide the employee with an incentive to continue his or her employment and to motivate the employee to maximize the value of the company upon a possible change of control.

Employee Retention Agreements generally provide a bonus structure and severance model for key employees, and may include significant severance pay, acceleration of stock options, or other benefits the company deems necessary to retain the employee. Drafters of these agreements should also pay careful attention to include, if applicable, the following provisions:

1. TERM OF AGREEMENT. The agreement should likely terminate upon the earlier of: (a) the termination of Employee's employment for any reason prior to a change of control, or (b) the date that all obligations of the parties hereto with respect to this Agreement have been satisfied. This provision should be drafted accordingly.

2. AT-WILL EMPLOYMENT. If applicable, the company and the employee should both acknowledge that the Employee's employment is and shall continue to be at-will, as defined under applicable law. If the Employee's employment terminates for any reason prior to a change of control, the Employee shall not be entitled to the benefits provided by this Agreement, or any other benefit unless otherwise available in accordance with the Company's established employee plans and practices or pursuant to other agreements with the Company.

3. DEFINITION OF TERMS. It is important that the following terms referred to in this Agreement be defined:

(a) Change of Control. "Change of Control" may be drafted to mean a sale of all or substantially all of the Company's assets, or a merger, consolidation or other capital reorganization of the Company with or into another corporation. Some limitations on that definition may also be applicable.

(b) Cause. "Cause" for Employee's termination should be defined to mean the good faith judgment of the Company's Board of Directors, that the undersigned has engaged in or committed any of the following: (i) gross negligence or willful misconduct in the performance of his duties to the Company, (ii) repeated unexplained or unjustified absence from the Company, (iii) a material and willful violation of federal or state law, (iv) commission of any act of fraud with respect to the Company, (v) breach of any confidentiality obligation to the Company, whether determined by agreement or by applicable law; or (vi) conviction of a felony or a crime involving moral turpitude causing material harm to the standing and reputation of the Company.

(c) Constructive Termination. "Constructive Termination" should be defined as occurring if here is (1) (a) a material adverse change in Employee's position causing such position to be of materially reduced responsibility, (b) any reduction of Employee's base compensation, or (c) Employee's refusal to relocate to a facility or location more than 50 miles from the Company's current location and (2) within the 30-day period immediately following any of the foregoing events, Employee elects to terminate his or her employment voluntarily.

4. SEPARATION BENEFITS UPON INVOLUNTARY TERMINATION FOLLOWING CHANGE OF CONTROL. The employee may want to include a provision that states that within one year of the effective date of a change of control, the employee's employment with the Company is terminated (an "Involuntary Termination") by the Company or the successor corporation without cause or, by the Employee as the result of a constructive termination by the Company or the successor corporation, then, the vesting of Employee's then unvested shares of the Company's common stock shall automatically be accelerated so as to become vested as of the effective date of the involuntary termination or constructive termination.

These are a few of the most important provisions that must be included in an effective Employee Retention Agreement. Provisions covering the enforceability of the agreement on successors of the employer and employee, waiver, choice of law, and severability should also be included.

A committed employee is extraordinarily valuable. You can gain staff commitment by meeting people's key needs: paying attention to people at all levels; trusting and being trusted; tolerating individuality; and creating a blame-free, can-do culture. But why go through all these? What is the importance of gaining trust and commitment? It all goes down to the fact that when a company gains the trust and commitment of their employees they establish employee retention. And employee retention is vital in establishing a firm foundation as the company proliferates and achieves their goals.

1. What Is Employee Retention?

Basically, employee retention is all about encouraging the people to commit themselves throughout in the company. Through employee retention, the company is able to lessen the additional expenses of hiring and training new people and at the same time build trust and commitment within coworkers, the result of which is happier, harder working employees.

2. The Basics Of Gaining Trust

The quality and style of leadership are major factors in gaining employees? trust and commitment, thereby, initiating employee retention in the long run. Clear decision-making should be coupled with a mutual and emphatic approach. This entails taking people into your confidence and clearly and honestly valuing their contributions. In turn, you gain employee retention.

As the boss, you should also

- Make yourself as visible as possible
- Show yourself to be approachable
- Always be willing to listen to others
- Never ask an employee to do something you would not be willing to do yourself
- Learn to trust those who work for you - trust is a two-way street

3. Sense Of Ownership In The Organization

A company can gain trust and commitment and expand their shareholders at the same time by offering employees the opportunity to purchase shares in the company, or better yet, implement a rewards program where shares in the company are offered instead of monies. By letting them feel that they will realize that the success of the company is their success as well, and its downfall is their failure too.

4. Pride

If your employee takes pride in being a part of the organization or the company, chances are that employee will surely stay for good. Employee retention is achievable when the employee feels good about the work, loves the company, knows that they are in good hands, and takes pride in their work.

3. Willingness To Work Long Hours

If you are able to encourage your employees to work long hours without having to mandate them or push them, chances are you are establishing a good sense of employee retention. This just goes to show that the employee is more than willing to commit longer hours of work not because of the overtime pay but the fulfilment that he or she wants to achieve.

4. Holding Personal Values Consistent With The Organization

If your employees continue to take part in the company's values and moral standards and incorporate these things within their own system, this goes to show that they are committed to the company and that they are willing to be a part of the group for as long as it exists. That is a clear manifestation of employee retention.

5. Creating A Strong Sense Of Team Spirit

Employee retention can be achieved if you know how to foster a sense of team spirit. If this is achieved, you can be assured that your employees will serve best for the interest of the group and their individual satisfaction as well. Corporate events and challenges between departments (or even between store locations) are examples of how you can foster team spirit.

6. Commitment

Commitment is the highest form of employee retention. If your employee is already committed to the company by expressing his or her desire to uplift the status of the organization, to boost productivity, and to refurbish mistakes and failures then you can be sure that the employee will stay for good.

Keep in mind that when employee retention is achieved, the company should, in turn, keep that retention as well by remunerating effectively and expressing appreciation through employee recognition. If this is all incorporated, then, a harmonious relationship between the employee and the company is at hand.

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Both Mark Warner & are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Mark Warner has sinced written about articles on various topics from Family Concerns, Do it Yourself Sunroom and Legal Matters. Mark Warner is an Analyst for RealDealDocs.com. RealDealDocs gives you insider access to millions of l. Mark Warner's top article generates over 27100 views. to your Favourites.

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