What are Golden Handcuffs

Golden handcuffs are a collection of financial incentives that are intended to encourage employees to remain with a company for a stipulated period of time. Golden handcuffs are offered by employers to existing employees as a means of holding onto key employees and increasing employee retention rates. Golden handcuffs are common in industries where highly-compensated employees are likely to move from company to company, such as the information technology or hi-tech industry where skills are in demand.

BREAKING DOWN Golden Handcuffs

Employers invest significant resources in the hiring, training and retaining of key employees. Golden handcuffs are intended to help employers hold onto employees that they've invested in. Other forms of golden handcuffs include contractual obligations that specify an action that an employee may or may not perform, such as a contract prohibiting a network television host from appearing on a competing channel, and SERPS – supplemental executive retirement plans - that are funded entirely by the employer.

Golden Handcuffs Example

Examples of golden handcuffs include employee stock options that do not vest until the employee has been with the company for several years and contractual agreements that stipulate certain bonuses or other forms of compensation that must be returned to the company if the employee leaves before a certain date. Golden handcuffs are financial rewarding packages, but also restrictive because they are designed to prevent key employees from moving to competitors for higher compensation.