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All-in-one HR platform · v2.0
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All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
A payment promised to an employee for staying until a set date or through an event such as an acquisition or a project, paid when the condition is met. It is taxable as salary, and the agreement should state what happens if the employee is let go before the date.
A retention bonus is typically offered during an acquisition, a critical project or when a key person receives an outside offer. HR drafts an agreement with the amount, the vesting dates and what happens if the employee resigns or is terminated before then.
Example: an engineer is offered ₹3 lakh payable in two parts, after 6 and 12 months. Payroll processes each instalment through regular salary, with TDS deducted in the month it is paid, and finance accrues the cost over the retention period.
The common mistake is paying the full bonus upfront with a clawback clause, which is harder to recover than a deferred payment. Another is not stating whether the bonus counts toward gratuity, leave encashment or other benefit calculations.
A fixed amount is promised for staying until a set date or event, such as a merger completing or a project going live. It may be paid in one sum or in instalments.
A joining bonus rewards accepting the offer and is paid at the start; a retention bonus rewards staying and is paid at the end of the period.
It depends on the agreement. Many say the bonus is still paid if the employment ends without cause, but not if the employee resigns or is dismissed for misconduct.
In a written letter that states the amount, the date or condition, what happens on resignation or termination, and that it is taxable salary when paid.
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