Retention bonus agreements are common in many industries, used to incentivize key employees to remain with a company for a certain period of time. These agreements often include a stipulation known as a “clawback” – a provision which allows employers to recover a portion (or all) of the bonus if the employee leaves the company before the agreed-upon time has elapsed.

What is a retention bonus agreement clawback?

In short, a clawback is a contractual provision that allows an employer to recoup a bonus payment in certain circumstances, usually when an employee leaves the company before a specified date. A retention bonus agreement clawback is designed to encourage long-term employment, as the promise of a larger bonus payment can be a powerful incentive to stay with an employer.

Why are clawbacks important?

Clawbacks protect employers from the financial risk associated with offering large bonus payments to employees who may not stay with the company. Without a clawback provision, employers might pay large bonuses to employees who leave shortly thereafter, resulting in a waste of financial resources and a loss of valuable talent.

When are clawbacks enforced?

Employers typically enforce clawbacks when an employee leaves before the agreed-upon time period has elapsed, or in cases where the employee’s conduct or performance is considered to be detrimental to the company. In some cases, clawbacks may also be triggered by a change in control of the company, such as a merger or acquisition.

How do clawbacks work?

Clawbacks can take many forms, but they usually involve the employer recouping a portion of the bonus payment from the employee. For example, an employer might require an employee to repay a portion of the bonus payment based on the time they spent with the company. Alternatively, an employer might require an employee to forfeit the entire bonus payment if they leave before the agreed-upon date.


Retention bonus agreements with clawback provisions can be a powerful tool for employers looking to incentivize long-term employment and retain key employees. By including a clawback provision, employers protect themselves from financial risk and ensure that valuable talent stays with the company for the agreed-upon timeframe. However, it’s important for employers to draft retention bonus agreements carefully to ensure that the clawback provision is fair and reasonable, and to avoid potential legal disputes down the line.