Retention Agreement Def

Retention Agreement Def: Understanding the Basics

A retention agreement is a legal contract between an employer and employee that outlines the terms and conditions of an employee’s continued employment with the company. The purpose of a retention agreement is to incentivize an employee to remain in their position with the company for a set period of time, typically one to three years. Retention agreements are commonly used in situations where an employee is highly valued or has niche skills that are difficult to replace.

Key Terms in a Retention Agreement

There are several key terms that are typically included in a retention agreement:

Retention Bonus: A retention bonus is a lump sum payment that an employee receives upon signing the retention agreement or upon completion of the retention period.

Conditions of Employment: The retention agreement will outline the conditions of employment during the retention period, including salary, benefits, job responsibilities, and performance expectations.

Termination: The retention agreement will also outline the circumstances under which either party can terminate the agreement before the end of the retention period.

Confidentiality and Non-Competition: Many retention agreements include confidentiality and non-competition clauses that prevent the employee from sharing confidential information with competitors or soliciting clients or employees from the company.

Benefits of Retention Agreements

Retention agreements are beneficial to both the employer and employee in several ways:

Employee Retention: Retention agreements incentivize employees to remain with the company, which helps to reduce turnover and the associated costs of finding and training new employees.

Skill Retention: Retention agreements are particularly useful in retaining employees with niche skills or specialized knowledge that would be difficult to replace.

Company Loyalty: Employees who sign retention agreements are likely to feel a stronger sense of commitment to the company, as they have agreed to remain with the company for a set period of time.

Improved Performance: Knowing that their continued employment is contingent on meeting certain performance expectations, employees who sign retention agreements are likely to work harder and perform better.


Retention agreements can be a valuable tool for employers looking to retain valued employees over a set period of time. By outlining the terms and conditions of an employee’s continued employment, retention agreements can help to incentivize employees to remain with the company, retain highly valued skills and knowledge, and improve overall performance. As with any legal contract, it is important for both parties to carefully review and understand the terms of the agreement before signing.

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