Retention bonus

When retention bonuses genuinely work

They are event instruments: keeping the finance team through an integration, the engineers through a migration, the leaders through a sale process. Where there is a date after which departure stops hurting, paying people to reach that date is clean economics, cheaper than replacing them mid-event and honest about what is being bought. Structured as stay-to-date with pro-rata or milestone instalments, they do the job.

When they backfire

As a general engagement tool they fail on schedule: the payment lands, the underlying reasons for leaving remain, and the departure happens at bonus-plus-one-day, now with an established price for staying. Worse, they teach the wrong lesson, that threatening to leave is compensable, and they leak: colleagues who were not offered one convert the discovery into precisely the disengagement the bonus was meant to prevent.

The design details

Define the stay conditions (date or event, what happens if the event moves), the treatment of exits (resignation forfeits; redundancy and employer breach should not), instalment timing (back-loaded amounts hold better than upfront ones), and interaction with other pay (does it count for super or leave calculations, which follows the same ordinary-earnings logic as other bonuses in Australia). And decide in advance what the answer is when someone asks for one, because after the first grant, someone will.