What is Stay Bonus?
The Short Answer
Stay Bonus explained simply
A Stay Bonus is a financial incentive offered to key employees to ensure their continued employment during a business sale, merger, or other significant ownership transition. The goal is to retain valuable talent, maintain operational stability, and ensure a smooth handover to new ownership. These bonuses are typically paid out upon the successful completion of the transaction or after a specified period following the sale, provided the employee remains with the company.
Real-World Example
The Software Company Sale
Imagine a software company being acquired. The new owner wants to keep the lead developer, Sarah, because she built the core product. To ensure Sarah stays for at least 12 months after the sale, the buyer offers her a $50,000 Stay Bonus, payable in two installments: $25,000 six months after the sale, and the remaining $25,000 at the 12-month mark, provided she is still employed.
Why this matters
Stay bonuses are important because they help keep critical employees on board during a business sale. This stability reassures buyers that the business will continue to run smoothly after the acquisition. For sellers, it helps maintain business value and ensures a successful transition.
When structuring a stay bonus, make sure the terms are clear. Define the payout schedule, conditions for forfeiture, and who is responsible for the payment.
When structuring a stay bonus, make sure the terms are clear. Define the payout schedule, conditions for forfeiture, and who is responsible for the payment.
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