What is the nature and purpose of a retention bonus?
- In Bonfigioli SA (Pty) Ltd v Panaino [2014] JOL 32441 (LAC), (2015) 36 ILJ 947 (LAC), at paragraph [25], the labour appeal court expressed the nature of a retention bonus as follows:
‘A retention bonus, as the phrase suggests, is paid in order to retain the services of an employee for a specified period. Payment of the retention bonus is contingent upon the employee entering into an agreement with the employer to complete a specific period of service with the employer. The bonus can be paid after the expiration of the period, during the period or at the beginning of the period, depending on the agreement between the parties. The purpose of a retention bonus is, inter alia, to avoid instability caused by employees, especially senior employees, who would constantly search for greener pastures; to retain institutional memory and to promote a seamless continuity of operations.’
- Furthermore, in Renaissance BJM Securities (Pty) Ltd v Grup (2016) 37 ILJ 646 (LAC), at paragraph [17], the labour appeal court held:
‘Retention agreements are therefore hand-outs with handcuffs or cheques with chains. The employee is given money and in return, he/she must give up his/her freedom to leave the employ of the employer. It curtails the employee’s right to jump ship even when the ship is being steered straight in the direction of an iceberg.’
