What Are Golden Handcuffs Definition Purpose and Examples
Golden handcuffs are financial incentives given to employees to discourage them from leaving a company. Employers offer incentives to retain individuals who have performed well or possess irreplaceable skills. However, golden handcuffs have a negative connotation as they prevent people from leaving unsatisfying jobs due to financial loss.
These incentives can include large bonuses, school payments, stock options, and a company car. They come with agreements that stipulate employees will only receive them after a certain period of employment or they will need to return them if they leave before a certain date.
Employers invest resources in hiring, training, and retaining key employees. Golden handcuffs help them retain their best employees and top performers. However, these incentives can also keep individuals stuck in unhappy jobs due to the financial consequences of leaving.
Golden handcuffs can be offered incrementally or all at once with certain conditions. They can take various forms such as stock options, supplemental executive retirement plans (SERPs), large bonuses, vacation homes, a company car, and insurance policies.
These incentives come with terms that require employees to stay for a defined period or return the compensation if they leave early. Golden handcuffs can also include contractual obligations like prohibiting employees from working for a competitor.
To illustrate, Charles has been with company XYZ for five years, and the company has heavily invested in his training. Charles has proven to be exceptionally skilled and valuable to the company. Realizing the risk of losing him to a competitor, XYZ offers Charles employee stock options. These options vest in five years, encouraging Charles to stay with the company and benefit from the financial gains.
In summary, golden handcuffs are financial incentives aimed at retaining employees and discouraging them from leaving. Companies offer various incentives, including stock options, bonuses, and other perks, with specific terms and conditions. These incentives can keep employees tied to their current jobs, even if they are not fulfilling.
