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What is a Stay Bonus Plan?
A Stay Bonus Plan is a formal agreement between a business enterprise and one or several of its key employees.
The purpose of this type of bonus plan is to entice key employees to remain (or stay) employed by the business enterprise during a transition period. The Stay Bonus Plan definition and its purpose is important to be understood by the business owner and the key employees alike.
Such transitional periods may include the sale of a business, the death or disability of the business owner, a merger, etc. The Stay Bonus Plan typically provides for bonus compensation after specific conditions are met by the employee.
Stay Bonus plans are typically looked upon favorably by business buyers especially when key employees are not employed under an employment agreement or contract. The best time to introduce the notion of a Stay Bonus Plan to the key employees in a business is during the exit planning process.
The plan should be in place before the business is for sale or when the business owner becomes ill or dies. Introducing such an arrangement, if done while simultaneously negotiating with active buyers for the business, can be very disruptive to the selling process. Likewise, if a business owner becomes ill or disabled or even dies, the likelihood of reaching a stay bonus plan agreement with the key employees lessons greatly.