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What are Golden Handcuffs?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 19 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Golden handcuffs are tools that a company uses to keep people loyal or encourage them to stay with the company. They are typically used with key employees when a company is concerned about losing employees or has a specific need to retain particular employees for a set period of time. They can take a number of different forms, depending on the company and the situation. They are usually not explicitly labeled as golden handcuffs and employees may be pressured into accepting them.

Classically, golden handcuffs take the form of employee incentive programs. While many companies provide incentives such as paid leave, stock options, and payments into retirement plans, golden handcuffs up these incentives. Employers may offer to pay for extra education, increase stock options, and take other measures to encourage an employee to stay. The incentives are structured in such a way that employees will be rewarded for staying longer and may be penalized for leaving.

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Sometimes, employees who leave early will be required to pay benefits back, or will not have stock options fully vested. This serves as a disincentive to leave by punishing employees who don't finish terms set out by the company. Likewise, companies can also ask that incentives be repaid if employees leave before a certain date. For example, employers might offer to pay for employees to go back to school after they have been working for at least five years, but require repayment if the employee leaves within five years after finishing school.

Some employees find golden handcuffs perfectly acceptable. They may be very happy with a company and intending to make their work there a life-long career. For them, there is no reason not to accept such incentives, and in fact accepting the golden handcuffs can significantly increase salary and retirement benefits. These employees can use the incentives to their advantage as they build their careers within the company.

Other employees may find them more frustrating or limiting. Not wanting to lose or repay benefits can force people to turn down offers of better jobs, and may discourage people from looking for different kinds of work. Some employees later regret accepting the benefits offered by a company, fearing that they limited their careers by accepting the short-term advantages of the benefits. Some companies offer short-term golden handcuffs like a request to stay for six extra months for an additional benefit, striking a balance between trapping people with the company for an extended period and losing key employees when they are needed most.

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