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| Krista Schofer |
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| Kristen Cruise |
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| Cheryl Cotton |
Employee retention
When attempting to address employee retention, employers can either use a “carrot” or a “stick” (or both).
Restrictive covenants: The ‘stick’
Usually, the “stick” will be in the form of restrictive covenants: non-solicitation and non-competition provisions. In a very general sense, non-solicitation clauses can be drafted to prevent former employees from soliciting a company’s customers, other employees/contractors and suppliers/distributers. In contrast, non-competition clauses prevent former employees from working for a competitor or starting a competing business.
As a general rule, non-competition and non-solicitation provisions must be drafted clearly and narrowly. While a carefully drafted non-solicitation clause may be enforceable, non-competition clauses are almost impossible to enforce.
In fact, Ontario passed the Working for Workers Act, 2021, which voids contractual non-competition obligations for Ontario-based employees (with the exception of C-level execs and for sellers in a sale of a company). No other province has similar legislation (yet).
Despite the difficulty in enforceability, employers will often include a non-competition clause even when it will not be enforceable as a deterrent to employees who are looking to leave and compete.
Retention bonuses: The ‘carrot’
One of the techniques increasingly being used by employers to retain key employees is retention bonuses. A retention bonus is typically paid out at the end of a specified time period if the employee remains employed with the company. They are often used when the company is about to go through some change or upheaval, such as a transaction. However, they are also being used more generally as one of the ways of limiting employee mobility. There are many things to consider if you plan to implement a retention bonus, including:
- What amount will be meaningful to the employee? What are competitors offering?
- How long do you want them to stay in order to receive the bonus? Is there an event coming up, such as a merger, that might shake the employee’s confidence in the company? Or are you just trying to get through the tail-end of the pandemic with your workforce intact?
- What happens to the bonus if the employee is terminated by the company without cause? What happens if the employee takes an extended leave of absence during the retention period, becomes permanently disabled or passes away?
Some argue that retention bonuses are not very effective. For instance, employees are willing to forgo a bonus if jumping ship to a competitor leads to a higher salary, better perks and a signing bonus. Alternatively, an employee may stay until they receive the bonus, and then jump ship. Also, for some employees, financial compensation is not the primary motivator for leaving.
Keeping employees happy
The current labour market reflects current demographic and sociological challenges. An aging population leads to less of an available workforce, while an increase of short-term freelance jobs breeds a desire for flexible work arrangements. As a result, employees are in a strong position to demand access to higher salaries, increased benefits and more fluid structures.
When scaling up operations, it is critical to pay attention to current and new employees with a focus on retention. In order to remain competitive, employers must pay close attention to evolving employment laws and trends and rethink their approaches to traditional employment and remuneration structures. Here are some ways in which employers can respond proactively to this changing employment landscape:
- Recognize employee needs. Having competitive salaries, policies and benefits will support personal and professional growth for your employees. Asking your employees for feedback on these systems can be an effective strategy to ensure their happiness.
- Increased onboarding and training. New hires who experience poorly planned or executed onboarding may form opinions influencing how they will perform their jobs, but also how long they are going to stay with the business. Onboarding is the earliest opportunity an employer has to establish a strong connection with the employee. Implement mechanisms that show people how their skills translate into purposeful workdays, and how their involvement contributes to the company, its customers/clients and the community.
- Prioritize work culture. Find new ways to build your team and boost morale. Define the core values of the company culture and communicate them to your workforce. This can help your employees feel more aligned with the goals of the business and each other.
This is the second of a two-part series. Read the first article: Workers and scale-up strategy: Key immigration law tips, part one.
Krista Schofer is a partner at Gowling WLG, specializing in the areas of business immigration, employment and privacy law. Krista leads the western Canadian immigration practice, counselling corporate clients seeking to hire foreign nationals in Canada and/or the U.S., and developing strategies to manage global workforces and cross-border travel. She also advises on all aspects of the employment relationship. Kristen Cruise is an associate in Gowling WLG’s Vancouver office and a member of the firm’s employment, labour and equalities group. She advises and represents clients ranging from small businesses to multinational corporations in all areas of workplace law, including wrongful dismissal, human rights, employment standards, workers’ compensation, mergers and acquisitions, and more. Cheryl Cotton is an associate in Gowling WLG’s Vancouver office and a member of the firm’s employment, labour and equalities group.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, The Lawyer’s Daily, LexisNexis Canada., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Photo credit / Dmitrii Musku ISTOCKPHOTO.COM
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