ne of the major HR challenges is employee churn. And because it’s cheaper to retain existing employees, than it is to recruit, on-board and train new ones, more and more attention and resources are being put into retention – defined as the ability of an organisation to keep its employees with them over a specified period.
Let’s have a look to some of the HR and legal mechanisms employer can use to hold on to people.
Restricted Stock Units (RSUs)
Granting employees Restricted Stock Units (RSUs) is still considered an innovative benefit on the Polish market, though it has been popular for years in the US and the UK, and has done a lot to help the IT, social media and gaming industries to grow. That’s why RSUs are common among employers with foreign capital and are becoming an important bargaining chip for employees, especially at senior levels. RSUs make the employee an ‘owner’ of the company – a strong incentive to remain with the employer.
Such an incentive plan consists of granting RSUs to participants (free of charge or subject to reduced payment) for a contractually specified period. Most often, the employee must remain employed by the company until the end of the vesting period. This means that if the employee resigns or is terminated, the RSUs granted to the employee remain unvested. Note that when RSUs are granted they do not yet represent a financial entitlement for the employee – they can only be converted into such.
Of particular interest is that RSUs may be provided either by the employer or by a group entity to which the employer belongs. The latter makes the exceptional nature of such benefit – as it is linked to the employment relationship in order to maintain it (that is, it fulfils the retention objective), but it may not arise from that relationship per se and that is why it should be distinguished from – for example – the basic remuneration paid to the employee in the context of the employment relationship. But depending which entity in the group is the RSU remitter, there might be a different tax and social security impact under Polish law.
Because this type of incentive differs from how employment benefits are typically understood, the parties can be more flexible in how they regulate the legal relationship between them. For example, it seems acceptable to stipulate that foreign law will govern any disputes in this respect.
Retention bonus
Another financial incentive that can help limit churning is a retention bonus – a one-off payment for selected employees. Polish law doesn’t regulate this, so the conditions, including payments conditions, must be determined precisely in the employment contract. The contract should specify that the employee must remain employed, for how long, and the amount of the bonus. There may also be certain exceptions to the obligation to pay the bonus that protect the employer. For example, if the employee does not work effectively or is absent or incapacitated for a long time.
Such a bonus can be structured in many ways. Payment may be made after the employee successfully completes their probationary period, or in instalments (monthly or quarterly) – which can increase progressively as the months go by. A retention bonus can also be linked to performance, but the terms of payment should be clearly stated to avoid ambiguity and potential claims for partial payment in the event of termination before the end of the defined retention period.
How effective a retention bonus is mainly depends on how large it is and how long the employee remains with the company. If the amount of the bonus is defined as a fraction of the employee’s, it may be insufficiently attractive. If the retention period is too long, the bonus may be too abstract.
There are also non-financial instruments. Many employees value an employer who invests in their development or provides a friendly work environment.
Loyalty agreements
Loyalty agreements are offered in exchange for opportunities where the employee can further their education or expand their knowledge by attending courses (MBAs, post-docs) whose costs are borne in whole or in part by the employer.
To keep the benefit, the employees stay in their job for a contractually agreed period. Otherwise, they have to repay the amount paid by the employer in full, or, for example, in proportion to the months worked after the completion of the course in question.
Flexibility supporting work-life balance
Flexible working conditions and measures for maintaining a good work-life balance certainly help retain employees. The Labour Code gives employers several options in this regard. For example, the employer can introduce flexible working hours, where the employees decide when to start work in the timeframe set by the employer. For example, full-time employees can start their 8-hour day work between the hours of 9 and 11 a.m. and finish between 5 and 7 p.m. This makes it easier for employees to balance their personal and professional lives and can also contribute to greater efficiency at work.
Another option is individual working time. As the name suggests, this should be initiated by the employee in a written request. It’s a bit like flexible working hours, but the individual nature of the schedule can concern the starting and finishing times, the number of working hours per day (if an equivalent working time system applies to the employee), the distribution of time off, and how breaks are used.
Employers can also allow staff to work remotely. In fact, many employees now consider this a standard practice, not a benefit. Some employers also allow their employees to work remotely from abroad, but this entails some risk for the employer, and such a policy should be decided case by case.
More flexibility can also be achieved by introducing task-based working hours, where employees are not subject to start and end times, but to tasks. How they spend their working time is in their own hands. Such a system, though, is not feasible for all jobs.
Motivating employees is a very important part of effective management. It affects not only staff commitment, but also efficiency and the overall workplace atmosphere. Employee job satisfaction cannot be overstated, either. The labour market has changed significantly in recent years, so it is worth keeping an eye on trends and being aware of the changing needs of companies and employees.
For further information, please contact:
Olga Dabrowska-Mel, Bird & Bird
olga.dabrowska-mel@twobirds.com
