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Retention Bonus And Severance Agreement

Retention Bonus And Severance Agreement Template for India

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Retention Bonus And Severance Agreement

"Need a Retention Bonus and Severance Agreement for our senior IT development team in Bangalore, with a retention period until March 2025 and bonus payment of 50% annual salary, as we're going through a merger with a US-based company."

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Document background
The Retention Bonus And Severance Agreement is a strategic document used by organizations in India during periods of significant change, such as mergers, acquisitions, restructuring, or other critical business transitions. It serves the dual purpose of ensuring business continuity by retaining key talent while providing clarity on eventual separation terms. This agreement is particularly relevant when companies need to maintain stability during uncertain periods or protect critical business functions. The document must comply with Indian employment law, including various statutes such as the Industrial Disputes Act 1947 and Payment of Bonus Act 1965, while addressing tax implications under the Income Tax Act 1961. It typically includes specific retention periods, bonus payment structures, performance conditions, and comprehensive severance terms.
Suggested Sections

1. Parties: Identifies the employer and employee, including their legal addresses and registration details

2. Background: Sets out the context of the agreement, including the employee's current position and reason for the retention bonus offer

3. Definitions: Defines key terms used throughout the agreement including 'Retention Period', 'Retention Bonus', 'Cause', 'Good Reason', and 'Severance Payment'

4. Retention Period: Specifies the duration during which the employee must remain employed to receive the retention bonus

5. Retention Bonus: Details the amount of the retention bonus, payment schedule, and conditions for earning the bonus

6. Severance Benefits: Outlines the severance package components, including payment calculation method and timing

7. Conditions for Payment: Specifies the circumstances under which the retention bonus and severance benefits will or will not be paid

8. Tax Matters: Addresses tax implications and responsibilities for both retention bonus and severance payments

9. Confidentiality: Requires the employee to maintain confidentiality about the agreement terms and company information

10. Non-Disparagement: Prohibits both parties from making negative statements about each other

11. Governing Law: Specifies that Indian law governs the agreement and identifies relevant jurisdiction

12. Dispute Resolution: Establishes the process for resolving any disputes related to the agreement

13. General Provisions: Contains standard clauses including amendments, notices, and entire agreement provisions

Optional Sections

1. Non-Competition: Restricts the employee from working with competitors for a specified period - include when protecting business interests is crucial

2. Non-Solicitation: Prevents the employee from soliciting customers or employees - include for senior positions or client-facing roles

3. Release of Claims: Employee's waiver of legal claims against the employer - include when severance is part of a separation agreement

4. Outplacement Services: Provision of career transition support - include when offering comprehensive severance packages

5. Benefits Continuation: Details about continuation of health insurance and other benefits - include when extending benefits beyond termination

6. Return of Company Property: Requirements for returning company assets - include when employee has access to significant company property

7. Cooperation Post-Employment: Obligations to assist with transition or future inquiries - include for key positions or ongoing projects

Suggested Schedules

1. Schedule A - Retention Bonus Calculation: Detailed formula and examples of how the retention bonus will be calculated, including any pro-rating provisions

2. Schedule B - Severance Benefits Calculation: Breakdown of severance package components and calculation methodology

3. Schedule C - Release Agreement: Form of release agreement to be signed upon termination

4. Schedule D - Company Property Inventory: List of company property in employee's possession to be returned

5. Appendix 1 - Compliance Certificate: Form of compliance certificate to be signed before bonus payment

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
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