Transition Stay Bonus is an extra payment for employees whose jobs are being terminated, thereby motivating them to remain with the organization for a period of time. A transition stay bonus is a tool in the hands of an organization which helps them in retaining as well as motivating the employees at the senior management level positions as well as the key employees.
It’s a common phenomenon especially when the company is being sold off due to its poor financial condition or when the company is insolvent or there might be a possibility of redundant buying wherein a small private firm is being acquired by a corporate giant. It’s the usual tendency of the organization to pay off such bonuses at the end of the sale period, requiring employee participation till the time the transaction ends.
Stay bonuses helps the management achieve a number of objectives:
a. Such bonuses which are paid to the employee are paid in cash and not in stocks. Also, the money or the cash that the employee gets depends on the value of the company at the time when it is being sold.
b. Since, employees receive the entire benefit amount if they stay in the organization for at least 2 years, the tendency or probability of employees leaving the organization is minimized to a large extent.
c. Motivate employees during company’s low phase.
According to the study conducted by Birol the concept of retention bonus is not about bringing loyalty in an organization it’s all about keeping the triage during the period when different transitions are taking place in the organization. They help the company in a positive manner as they help in retaining the desired talent at the time when it’s required the most. It often comes under a contract wherein the longer you tend to stay with the organization the higher is the bonus that you get.
It is very crucial especially for:
a) Preservation of the talent pool.
b) Maintaining the key people and functions in continuation to help the organization.
c) Building a long and fruitful relationship with the employees.