Golden Handcuff is financial incentive & other benefits offered to key employee as measure to retain them in the organization. Golden Handcuff is a method of motivating the employee into staying in the job because of his/her expertise for the company.
Golden handcuff cab be offered in various ways
- Different contractual arrangements
Employer sign contract with individual employee which will give him certain special benefits. These contracts are tailored made for each employee.
-Employee Stock Option
These are long term stock option given to high performing employee which are exercised after certain predetermined period of employee service.
Golden Handcuff as the name suggest are similar to parrot in golden cage. Though financial benefits are lucrative, these are mostly deferred payments. These can be encashed if employee stays with the organization for sufficiently long period of time. In this way employer ensures employee stays with carrot of long term gain.
Penalty for early exist by employees
In case employee leave company after agreeing to contract of golden handcuff, there is penalty clause in these contracts. Penalty clause could be end of employment or leaving stock options offered.
This clause if present in employment contract, prevents employee from joining competitor of the employer for certain specified period of time. In case of early resignation by employee this clause prevents him from working in competitor firm. This act as deterrent to employee before he can resign.
Non-disclosure agreement which now most of the multinational companies sign with their employees at the time of joining. Under this agreement employee cannot share important information with competitor. This also prevent employee from moving towards competitor firm.
Golden Handcuff on one hand offer big financial benefits such as stock options and on other side bind employee by non-compete clause ,non-disclosure agreement. Also financial gains offered are available after sufficiently long period. Golden handcuff in this way offers no immediate lucrative financial gain but if employee retains for long period and performs well, he can gain from golden handcuff.