Navigating Retention Contracts: Key Insights for Global Businesses
Given the current economic conditions and the revolutions that have taken place in the Middle East and North Africa during the last two years, we believe that it is important to offer you something to read about how to seal the deal with your most important asset, your employees. Cutbacks, downsizings, economic turmoil, war, terrorism, and crime proliferate on the world stage today. The question becomes how to best motivate and keep the key people that are necessary to succeed in these difficult times. What can managers do to not only keep their employees but motivate them to accomplish great things, to excel and go “above and beyond” their normal duties? The answer is simple: Implement a retention agreement! A Retention Contract is a contract, agreement, note or other enforceable document that serves as a financial and psychological motivation for an employee to continue working for their employer until the contract spells the end of the relationship. In the meantime, if the retention contract contains non-compete or confidentiality clauses, those restrictions will remain in force even if the employees leave before the contract term ends. However, the employer is required to pay the employee a certain amount of compensation as outlined in the retention contract formula at the end of the term.
Retention contracts can be customized to meet the needs of the employer and their business. It can be based on business performance or individual employee performance. Or a combination of both. For example, at one international automobile company, employees get paid annually if the number of cars manufactured exceeds a certain number, regardless of employee performance. However, another international automobile company offers bonuses and pay raises to employees based on individual performance. Many companies pay bonuses and commissions to employees in sales positions and sales commissions can be paid quarterly, annually, or monthly.
Retention contracts can also be customized for the employer. For example, it can include the opportunity for promotion, advancement, or relocation within the company or its affiliates. A retention contract can also specify the employer’s obligations. For example, legal counsel can use this type of contract to ensure that their client was getting the fair deal they had promised them, or to ensure that their clients fulfilled their promises to their employees. Although any country can enforce a contract that is not prohibited by law, legal counsel can help in ensuring that a contract has valid meeting of the minds between both parties, sufficient consideration (something of value) is given, capacity (the ability of both parties to enter into a contract), and the intent of the parties to enter into a legally binding agreement. Moreover, legal counsel can ensure that no important clauses are left out.
In addition, legal counsel can help to provide a clear picture of what happens to all parties when uncertainty about a project arises, such as the current situation in Syria or Egypt. Legal counsel can help you anticipate the future by showing you how other companies have successfully negotiated their retention contracts with their employees.
