Retention Bonus Policy

Hi,
I am working with an Start-up IT company and i am required to draft a policy for introducing Retention Bonus as a part of deferred pay in the CTC.
Am looking for a basic understanding on the points to consider in the policy or general outlines/draft of a policy.
Would appreciate guidance and advice on how to go about this..
Thanks!!

Retention Scheme

Objective: To retain the key contributors of the Company and motivate them by ensuring a retention bonus for their commitment towards the Company.

Purpose: In the past few years the attrition rate in “Company’s Name” has been very high. A lot of “Company’s Name” Employees have been poached by competitors.

The recent Employee opinion survey also highlighted the employee concern towards the low level of benefits at “Company’s Name” when compared to other Indian companies

This scheme will aid in the retention of certain key Employees of “Company’s Name” by providing a retention Bonus in consideration of their continued employment.

Retention scheme will prove to be an attraction for employees to continue in the organization longer and bring stability to “Company’s Name” by developing local talents in the long term.

Eligible Employees: all “Company’s Name”employees

Scheme Rules:

This scheme works like the “Super Annuation Scheme”: It will encourage the selected employees to remain with the company for more than 2 years starting January 2010, up to 6 years.

- The retention bonus will be payable from 2012 (2years) up to 2015 (6 years)

- The total amount of the bonus over the 6 years is: 6 months of 2010 basic salary

- This amount will be paid in 3 installments, as described in the table below, as long as the selected beneficiary remains in the employment of the company

- Employee will not be entitled to pro –rata payment if he/she leaves the organization before the due date of the retention scheme.

- The retention bonus will be paid in lump sum along with the Bonus payment in that particular year.

- No retention bonus will be paid in the event of dissolution or liquidation of the Company.

- Upon the management decision and in agreement with regional HR, more employees will benefit from the scheme in the future

Effective Date 1st January 2010

Level of Retention 6 months 2010 Basic Salary, equivalent to 50% of Annual Basic pay.

Payment Arrangement Payment will be made in 6 years:

1st Year – Nil

2nd Year – 10%

3rd Year – Nil

4th Year – 40%

5th Year – Nil

6th Year – 50%

Project Cost: Please see below and attached excel file

Participants: No. of employees

In KEuros

Year Accrual Payment

1

2

3

4

5

6

Just see if it can help you to formulate the same..

Pls note that Retention Bonus/allowance attracts P.F.
This is from e-how HR site.
HR Retention Policies
By Rowena Odina, eHow Contributor
Every organization wants to create an environment where valuable employees are motivated to stay and contribute. A retention policy states management's commitment to implement strategies that keep employees satisfied, loyal and working to their full potential.
Strategies
Although benefits and financial compensation are important for retention, organizations should look at other factors, such as management climate, supervisor relationship, company culture, development opportunities, work/life balance, training and employee recognition. The best retention strategies align employee motivations with company goals.

You can keep 5% of basic salary as the retention amount. You can give this amount back to employee after successful completion of 2 years without any interest.

1. employ RSI instrument: there are 9 career anchors (wealth/ control/ meaning for life/ expertise/ autonomy/ creativity/ security/ social affiliation/ forgot the 9th one )

so we need to design a system which rewards the top 3 career anchors of each individual..

2. a good example which we have implemented at one of my prev organisations:

for the first 5 years, one gets gratuity @15 days .6th year onwards, it becomes @1month..

this makes it substantial...

3.ESOPS come into picture

4. sabbaticals for education/ etc

5. in china employers understand the need of housing and there is a fund to specifically cater to that (just like Pf n ESI).. it is 300-500 times the monthly salary..

6. in US we have a scheme specifically to cater to seasonal industries.. when the person returns to work in the next season, the difference between his salary n social security is compensated partially by the employer thus guaranteeing return..

7. we have 100% sponsoring of children education

8. introduce competence mapping and succession planning, this will stand you in good stead

9. encourage employees to become entrepreneurs (i have helped >10 people start their own business)

10. if people are exploiting ur company as a stepping stone or a talent nursery, convert it into a business opportunity..

(several Companies entered into voice n accent/ customer service training to cater to bpos... another good example is paid project trainings ...)

the list is endless..