They are commonly used in employee management when employers want to retain high-value employees or executives who excel in their work, especially in any high-paying career, e.g. tech and financial industries.<\/p>\n
Types of golden handcuffs\u200b:<\/strong><\/p>\n There\u2019re different types of golden handcuffs that employers can use to incentivize their employees such as bonuses, a vacation house, loan repayment benefits, pensions, and any types of employee equity<\/a>.<\/p>\n By valuing the perks carefully with an employee\u2019s need, you can effectively discourage your staff from leaving for another company.<\/p>\n Golden handcuffs work by offering a financial benefit that executives have to provide a certain number of years of service to receive. For example, stock options with a 5-year cliff vesting schedule incentivize them to stick around for at least 5 years to receive the full benefits of 100% vested options. Learn more about the\u00a0vesting schedule<\/a>\u00a0here.<\/p>\n Another type is to allow executives to receive a benefit but they will need to pay it back if they leave before the agreed period. For example, if an executive receives tuition reimbursements, they\u2019ll likely need to pay them back if they don\u2019t stay for the agreed period of them.<\/p>\n There are benefits for both your company and those employees targeted in this type of executive compensation plan. But, if \u201cgolden handcuffs\u201d aren\u2019t well implemented, it\u2019ll result in a lose-lose scenario. Let\u2019s see their pros and cons:<\/p>\n When companies lose key personnel to a competitor, it is a double blow \u2013 the company loses a human asset and the competitor gains a top talent, along with all their expertise and experience.<\/p>\n So, when you retain those individuals, not only do you continue to benefit from their high performance, but you deny your competitor access to that same excellence.<\/p>\n With effective \u201cgolden handcuffs\u201d, it is far less likely that employees will leave, which in turn means that the company doesn\u2019t have to face the time-consuming and expensive recruitment and training process.<\/p>\n When you provide equity compensation as a type of golden handcuffs, you give some of your ownership in your company to your employees. Employee ownership allows employees to have a feeling of team spirit \u2013 they\u2019re not just employees, they\u2019re employee-owners and can often make valuable contributions to the company\u2019s direction through shareholder voting.<\/p>\n These incentives are not just about retaining existing staff; they can also be used to attract top talent. If a company is looking to recruit a proven candidate to a senior position, adding an attractive \u201cgolden handcuffs\u201d program can be a decisive factor.<\/p>\n You plan to provide your key employees with attractive benefits in exchange for their loyalty. But, if you intended to handcuff them or you didn\u2019t consider their needs and the values of the perks offered, they\u2019d feel trapped and disengaged.<\/p>\n A\u00a0Gallup\u00a0<\/a>survey found that disengaged employees cost organizations 34%. So, It\u2019s truly a lose-lose situation.<\/p>\n When it comes to golden handcuffs, large bonuses are one of the most common vehicles. But it doesn\u2019t mean you have to use them. Again, you want to offer your key employees true and unique benefits in which they will be less tempted by an outside offer.<\/p>\n Many companies offer employees the same perks \u2013 cars, vacations, and hefty bonuses, so employees can easily leave their current company and get the same benefits somewhere else. (Source:<\/b>\u00a0Drew McLellan<\/u><\/a>, CEO of Agency Management Institute)<\/p>\n There\u2019s no one-size-fits-all solution because they likely want different things. So, the perks should be a customizable benefit to each person. For example, student loan repayment benefits would be ideal for young, high-value employees while an executive who is planning for retirement would be attracted to a good pension scheme.<\/p>\n So, take some time to listen and outline an agreement to help them achieve their goals.<\/p>\n Creating a customizable plan for each person can increase HR\u2019s workload. But with an automated software program, you can easily set up, track and manage each employee\u2019s equity award.\u00a0Speak with us today<\/u><\/a>. We can help you manage your golden handcuffs.<\/p>\n Building a golden handcuffs strategy isn\u2019t all about throwing endless perks. Without carefully considering your business goals, they\u2019ll do little to help your company grow.<\/p>\n For example, you\u2019ll need to think about who should receive the incentives, what vehicles should be used (e.g. stock options are ideal if employee ownership matters to you), what competitors are offering, and when should they fully receive the incentives.<\/p>\n So, always think about if your agreement works together with your goals.<\/p>\n It\u2019s not all about monetary compensation.<\/p>\n People stay loyal to a company for all sorts of reasons \u2013 a healthy work and life balance, a great manager, company culture, career ladders, flexible work arrangements, the job fits their values, etc.<\/p>\n So, creating a place where people feel good about coming to work by making each employee valuable, safe and engaged is your ultimate goal.<\/p>\n Golden handcuffs are an effective tool to improve employee loyalty if you use them properly.<\/p>\n If you decided to include stock options or any other forms of equity in the agreement, you might need an effective equity compensation program to help you manage each employee\u2019s equity awards.<\/p>\n At Global shares, we provide award-winning equity compensation plan administration. From software and administration to compliance and reporting \u2013 we can make equity management simplified.<\/p>\nHow do golden handcuffs work? (+ examples)<\/b><\/h2>\n
Golden handcuffs Pros & Cons<\/b><\/h2>\n
![\"Golden](\"https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2021\/04\/golden-handcuffs.png\")
1. Retain and gain (twice)<\/h3>\n
2. Save money and resources<\/h3>\n
3. Build Employee ownership with equity compensation<\/h3>\n
4. Attract top talent<\/h3>\n
But.. what happens if your employees feel locked and stuck?<\/h3>\n
Create an effective golden handcuffs agreement<\/b><\/h2>\n
1. Bonuses are not always necessary<\/h3>\n
2. Don\u2019t assume. Listen to what your staff needs<\/h3>\n
3. Align employee retention with business goals<\/h3>\n
4. Think beyond golden handcuffs<\/h3>\n
Contact Global Shares<\/b><\/h2>\n