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Employee Retention Ideas

Golden Handcuffs: Low-Cost Employee Retention Ideas

Employee Retention IdeasIt’s been reported that 25% of employees want to seek new employment following the pandemic and that 52% are thinking of changing the type of jobs to seek. It’s been called the Great Resignation. So how do you keep valued employees on your payroll? Consider golden handcuffs, which are defined by Merriam Webster as “special benefits offered to an employee as an inducement to continue service.”

Small businesses usually can’t afford to offer the menu of benefits offered by large firms. But they can get creative and offer some desirable golden handcuffs.

Work arrangements

Offer the work schedules and other arrangements that your employees want and appreciate. These include:

  • Remote work options. This may be on a full-time basis or a few days a week. Especially given some employee concerns about returning to the workplace as the pandemic eases, this work option may be favored. What’s more, employees may be able to relocate (e.g., to be near family, to have a lower cost of living) while remaining on your payroll.
  • Flexible work hours. The 9-5 grind may not work for everyone. If your business can accommodate other hours, allow employees to choose their own schedules. This may even be desirable by remote workers who have family responsibilities (e.g., child care or caring for an elderly parent); they may work for you early in the day or late in the evening to fulfill the hours requirement.
  • Four-day work weeks. Some businesses are moving in this direction. Again, it’s not suitable for every type of business, but may be a good arrangement for some. It was reported that this has been an “overwhelming success” in Iceland.

Employee discounts

Allow employees to take advantage of what your company offers…its goods or services. Offering a price reduction for employees on what is offered to customers is a tax-free fringe benefits (not taxable to employees or subject to payroll taxes) as long as the reduction falls within set parameters:

  • For a discount on services, 20% of the price you charge nonemployee customers for the service.
  • For a discount on merchandise or other property, your gross profit percentage times the price you charge nonemployee customers for the property.

The only catch: the discounts must be offered to employees on a nondiscriminatory basis. If not, then discounts to highly compensated employees become taxable to them.


Giving employees an ownership interest in the business gets them skin in the game. Public corporations can easily give stock options that vest over time. Privately held businesses have other ways to share ownership with employees.

  • Employee stock options plans (ESOPs). Incorporated businesses may use ESOPs, which put ownership into the hands of employees while offering tax advantages to the business. According to the National Center for Employee Ownership (NCEO), there are now about 6,000 ESOPs covering more than 14 million participants. The NCEO has more information about how ESOPs work.
  • Equity grants. Incorporated businesses may give employees stock options or restricted stock units (RSUs). Under a special rule—called a Section 83(i) election—when employees exercise the options or get a settlement of an RSU, they may elect to defer the recognition of income for up to 5 years. The IRS has more information about equity grants.

Final thoughts

Be sure to know which benefits must be offered on a nondiscriminatory basis (e.g., equity grants), so you don’t run afoul of tax rules. Want more ideas on employee retention? Robert Half, a talent solutions company, has 14 effective employee retention strategies. Pick the ones that are suitable to your situation.