A stay pay agreement, also known as a retention agreement, is an employment contract between an employer and an employee. This agreement is used to incentivize employees to remain with the company for a specific period of time, typically during a merger or acquisition.
In a stay pay agreement, the employer agrees to compensate the employee with a retention bonus if they stay with the company until a certain date. The bonus amount is often a percentage of the employee`s base salary or a predetermined sum. This bonus is typically paid out after the agreed-upon period has passed, often 12-24 months.
The purpose of a stay pay agreement is to retain key employees during a transition period, such as a merger or acquisition. During these times, employees may be uncertain about their job security and may be approached with job opportunities elsewhere. By offering a retention bonus, the employer provides an incentive for key employees to stay with the company and contribute to its success during the transition period.
Stay pay agreements are typically offered to employees who are deemed critical to the company`s success during the transition period. This may include executives, managers, or other key personnel. In some cases, stay pay agreements may be offered to entire departments.
While stay pay agreements can be effective in retaining key employees, they are not without risks. If the employer does not follow through with the agreed-upon bonus payment, the employee may feel betrayed and may leave the company. Additionally, the agreement may create tension between employees who receive a retention bonus and those who do not.
In conclusion, stay pay agreements are a tool used by companies during transitions to retain key employees. They provide an incentive for employees to stay with the company during a time of uncertainty. However, careful consideration should be given to the risks and potential drawbacks of such agreements before implementing them.