Employee retention agreement template

Employee retention is crucial for any business, especially in today’s competitive market. One way to ensure that valuable employees stay with your company is through an employee retention agreement. 

In this article, we explore what an employee retention agreement is, its purpose and how these contracts are used. We also look at the essential elements of an employee retention agreement template and how you can manage these templates. 

Lastly, we discuss the challenges of managing employee retention agreements and how Juro can help automate the process.

What is an employee retention agreement?

An employee retention agreement is a contract between an employer and an employee, designed to keep the employee with the company for a specified period. This agreement usually includes incentives such as bonuses, salary increases, stock options or other benefits. The goal is to provide enough motivation for the employee to remain with the company rather than seeking opportunities elsewhere.

What is the purpose of an employee retention agreement?

An employee retention agreement is designed to incentivize key employees to remain with a company for a specified period – particularly during critical times such as mergers, acquisitions, restructuring or periods of uncertainty. 

It serves as a strategic tool to secure the commitment of valuable employees, thereby supporting the company's long-term goals and stability.

The primary purposes of an employee retention agreement include:

• Ensuring stability: Retaining crucial talent helps maintain operational continuity and stability, ensuring that business operations proceed smoothly during transitions or challenging periods.
• Protecting intellectual capital: By keeping experienced and knowledgeable employees, a company safeguards its intellectual capital and critical skills that are essential for maintaining competitive advantage.
• Reducing turnover costs: High employee turnover can be costly due to the expenses associated with recruiting, hiring and training new employees. Retention agreements help mitigate these costs by encouraging existing employees to stay.
• Maintaining morale: Retaining key employees can boost overall employee morale and confidence, reducing the anxiety and uncertainty that often accompany significant organizational changes.
• Facilitating successful transitions: During mergers or acquisitions, retaining key employees ensures that there is continuity in leadership and expertise, which can be crucial for the successful integration of the companies involved.

Who manages employee retention agreement contracts?

Employee retention agreement contracts are typically managed by the human resources (HR) department, often in collaboration with the legal and finance departments. 

By collaborating, these departments ensure that employee retention agreements are effectively managed, legally sound and financially viable. Here’s a breakdown of their roles:

Human resources

• Usually responsible for drafting the retention agreements and negotiating terms with employees.
• Communicates the terms and benefits of the agreement to the employees and ensures they understand their obligations and the company's commitments.
• Monitors compliance with the terms of the agreement – making sure that both the company and the employee meet their respective obligations.

Legal department

• Reviews the retention agreements to ensure they comply with labour laws and regulations and to protect the company from potential legal issues.
• Oversees the formalization and storage of these contracts, ensuring they are properly executed and enforceable.

Finance department

• Involved in budgeting for the retention bonuses or other financial incentives included in the agreements.
• Processes and pays out any financial incentives or bonuses promised in the agreements, according to the terms.

Employee retention agreement template use cases

Employee retention agreements are used in various scenarios. They may be used to ensure that key employees stay on until the completion of a crucial project, or for high-demand roles in order to keep employees with unique skills or expertise and safeguard against competitors trying to lure away top talent. In mergers and acquisitions, they are used to retain critical employees during transitional periods.

What should an employee retention agreement template include?

An effective employee retention agreement template should include the following elements:

Purpose. A brief statement explaining the purpose of the agreement, such as retaining key employees during critical periods or transitions.

Employee information. Name, position, employment start date, department.

Retention period. Start date and end date of the retention period.

Compensation and benefits. Details of retention bonus, salary adjustments, additional benefits.

Roles and responsibilities. Job description changes and performance expectations.

Conditions of the agreement. Commitment to stay, conditions for payment, repayment clause.

Confidentiality and non-compete clauses: Provisions to protect company information and non-compete terms.

Termination conditions. Voluntary and involuntary termination terms, termination for cause.

Dispute resolution. Mediation/arbitration methods and jurisdiction for legal matters.

Miscellaneous. Entire agreement clause, amendment conditions, severability.

Signatures. Employee signature, company representative signature, witness signatures if applicable.

How are employee retention agreement templates usually managed?

Employee retention agreement templates are often managed through a manual process involving several steps. Here’s a typical workflow for managing these templates manually:

1. Template creation

• The HR or legal team drafts the retention agreement template using a word processor. This template includes standard clauses, terms and conditions relevant to employee retention.
• The draft is reviewed by senior HR personnel and legal advisors to ensure compliance with company policies and legal requirements. Necessary revisions are made, and the final version is approved.

2. Storage

• The approved template is stored in a centralized location, such as a shared network drive or cloud storage service, like Google Drive, OneDrive or Dropbox. This ensures that authorized personnel can access the latest version.
• A version control system (often manual, like a document history log) is maintained to track changes and ensure the use of the most current template.

3. Distribution

• Access to the template is restricted to authorized personnel to prevent unauthorized modifications. This is typically managed through folder permissions in the storage system.
• When a manager or HR representative needs the template, they request access or are provided with a copy from the centralized storage.

4. Customization

• The HR team or manager customizes the template for each specific employee. This involves adding the employee’s details, specific retention terms and any unique clauses required for the agreement.
• The customized agreement is reviewed by the HR and legal teams to ensure accuracy and compliance with both the template’s standards and any specific terms added.

5. Execution

• The HR team meets with the employee to discuss the retention agreement, addressing any questions or concerns.
• The agreement is signed by both the employee and an authorized company representative. This is usually done in person, with wet ink signatures, although some companies might use electronic signatures.

6. Storage and management

• The signed agreement is filed in the employee’s personnel file, either as a physical copy in a filing cabinet or a scanned copy in the company’s digital HR system.
• HR monitors the terms of the agreement, ensuring compliance and tracking any follow-up actions required.

7. Renewal and updates

• The retention agreement is periodically reviewed to ensure it remains current with company policies and legal requirements.
• Necessary updates are made to the template, which then goes through the review and approval process again before being stored and used.

This manual process can be time-consuming and prone to errors, highlighting the need for automated solutions to streamline and secure the management of employee retention agreements.

Automate employee retention agreement contracts in Juro

Fortunately, Juro’s AI-native contract management platform can help legal and HR teams manage employee retention agreements more efficiently and effectively by streamlining the entire process.

Simplified template management

• Store all retention agreement templates in a single, centralized and secure repository. This makes sure everyone uses the most current version.
• Juro automatically tracks changes to templates, maintaining a version history. This version control feature helps avoid discrepancies and ensures compliance with the latest legal and company standards.

Easy template creation

• Use a library of pre-approved templates that can be quickly accessed and customized for different employees or situations. This saves time and ensures consistency across all agreements.
• Juro’s legal AI assistant can help with drafting and customizing employee retention agreements, reducing the time spent on manual drafting and minimizing the risk of human error.

Real-time collaboration

• Legal and HR teams can collaborate on contracts in real-time within Juro’s platform. They can make comments, suggestions and edits seamlessly, ensuring that all input is captured efficiently.
• Set up automated approval workflows to make sure each agreement is thoroughly reviewed by all necessary parties before being finalized – streamlining the process and reducing delays.

Integration with existing tools

• Juro integrates seamlessly with existing HR and legal systems, allowing teams to work within the tools they are already familiar with. This enhances productivity and reduces the need for additional training.

Electronic signatures

• Facilitate the signing process with built-in electronic signature functionality. Employees and company representatives can sign agreements quickly and securely from any location, speeding up the execution process.
• Maintain a detailed audit trail of all actions taken on each agreement, ensuring transparency and compliance with legal requirements.

Secure storage and easy access

• Store all signed agreements in a secure and searchable digital contract repository. This makes it easy to retrieve and review agreements as needed, enhancing efficiency.
• Use Juro’s robust access controls to protect confidential information and ensure that only authorized personnel can view or modify sensitive documents.

Automated reminders and notifications

• Set up automated reminders and notifications for key dates and actions, such as agreement renewals or follow-up reviews. This ensures that no critical tasks are missed, maintaining compliance and efficiency throughout the contract lifecycle.
• Track and manage tasks associated with retention agreements within the platform to make sure important deadlines are met.

Proactive management and insights

• Use Juro’s analytics tools to gain insights into contract performance, identify trends and make data-driven decisions regarding employee retention strategies. This helps improve overall contract management practices.
• Generate custom reports to track the status of retention agreements, monitor compliance, and identify areas for improvement. This feature supports strategic decision-making and enhances operational efficiency.

By leveraging Juro’s AI-native platform, organizations can streamline their workflows, reduce errors, ensure compliance and gain valuable insights – ultimately improving their overall contract management strategy.

Juro’s AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.