In a perfect world, when one business buys another, the staff of the purchased company would be able to transition into a role with the buying company.
Unfortunately, this isn’t always the case. What’s more, the company being purchased may not know what is going to happen to its employees for some time. In many cases, the company being purchased will need to tell their employees about the sale before they really know what that means for their future. When this happens, how do companies get their employees to stay on board and keep them engaged during the transition?
While it may be impossible to keep everyone on board, there are a few tactics employers can use to encourage employees to see them through a transition.
The worst thing that can happen for employees is to hear about the sale and their impending loss of employment through the grape vine or some unreliable channel.
Being completely honest with employees as soon as possible helps to maintain trust and relationships employees already have built with their leaders. The minute employees feel as though information is being withheld or trust is broken, they are unlikely to want to stick around.
If it has been determined that employees may have the opportunity to stay, integrating them into the new company culture as quickly as possible will help them build loyalty to that new company and its leaders.
If there is an interview process, helping employees prepare by sharing information or skills the new company would be looking for will help them feel supported in the transition.
When and if it is determined that the new company may not be transitioning any of the current employees, stay or retention bonuses may be necessary to keep employees on board until the sale is final. And in many cases, stay bonuses can be effectively used to reward employees who are willing to allow the buyer to figure things out. Stay Bonus Plans don’t always mean the buyer intends to cut loose the employees after the plan expires and the employees are paid their bonuses.
Stay bonuses are paid out to employees who stay with the company until the closing date or some period in the future when the transition work is expected to be completed.
If the period between the announcement and the last official day or transition phase is long, it may be beneficial to pay out stay bonuses in increments at certain intervals or milestones throughout the sale or transition.
Dealing with employee retention during the sale of a business can be a touchy subject, but with the proper planning and forethought, employees can help businesses transition smoothly. And then it’s a win-win for everyone involved.
1. How can a company determine the retention bonus?
2. How can a company determine the $$ as part of a severance package for the employees that end up not staying?
The retention bonus is discretionary. The business owner typically considers the value of the employee who they’d like to retain post-closing and how much disruption the loss of this employee may cause.
There really is no formula for retention bonuses.
As for a severance package, these are discretionary unless there is a contractual agreement between the employer and the employee that spells out severance compensation.
Hope this helps…