Retain Valuable Employees with "Handcuffs"

Cynthia Umphrey
November 2, 2007 — 1,361 views  
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Can you imagine your most valuable employee leaving your company; especially to work for a competitor? It would be quite difficult and expensive for both you and your business. Golden Handcuff plans can help minimize this risk. Golden Handcuffs are designed to retain and incentivize employees who: are critical to your daily operations, could affect the value of your business if you sold it, or would be key leaders if you decided to retire and hand over management. The types of incentive arrangements vary from a simple bonus plan to a more detailed phantom stock plan. Because they are not tax qualified plans, there is maximum flexibility to tailor the Handcuffs to your particular company goals, and finances. You can also select which employees will benefit from the plan with virtually no restrictions. The plans can provide a modest or a significant financial benefit and positively affect employee morale and productivity. You can also use very unique vesting schedules so that an employee is always leaving something on the table if they quit working for you. When might you consider using Golden Handcuffs? Typically, these incentive arrangements are used because of instability (perceived or real) or a desire for growth. Examples of instability include: an aging or ill owner, an owner planning to sell, industry turmoil or a significant increase in competition for employees. On the other hand, you may want your company, one of its divisions or a new venture to really grow. In this instance, you could use Golden Handcuffs to get optimal employee participation and to protect against losing a key employee during a critical growth phase.

Cynthia Umphrey

Kemp Klein Law Firm

Cynthia Umphrey helps families and business owners make significant personal and professional life decisions. Ms. Umphrey calls upon over 10 years of experience in estate planning, probate administration, business structuring and business exit planning to guide you though life's most important choices.