Faced with increasing difficulties in attracting and retaining talent, many companies are turning to measures such as specialized training and financial incentives. In this context, we analyze two tools whose implications should be known: the permanence agreement regulated by the Workers’ Statute and retention bonuses.
Companies are suffering more intensely from the difficulties in attracting and retaining talent. Therefore, to persuade employees to bet or continue to bet on the business project, they implement different types of measures to promote flexibility, make professional careers attractive, create a recognizable company culture through corporate governance and sustainable development, design effective and competitive training plans, establish adapted remuneration plans, etc.
In this post, we examine formulas associated with training and remuneration plans, focusing on the permanence agreement regulated in article 21.4 of the Workers’ Statute (WS) and the commonly known as retention bonus.
In Spain, the possibility of limiting the free choice of profession or trade recognized in articles 35.1 of the Spanish Constitution and 4.1 a) of the WS is restricted. But it is possible in certain cases, such as the one provided for in article 21.4 of the WS. This article allows the company to agree with the employee to remain for a certain period, when there is proportionality or balance of interests and the following minimum requirements are met:
- That the employee receives a professional specialization to (i) implement specific projects or (ii) perform a specific job.
- That this professional specialization is at the expense of the company.
- That the agreement has a maximum duration of 2 years.
- That the agreement is formalized in writing.
Once these requirements of the agreement have been met, if the employee leaves the company before the deadline, the company will be entitled to compensation for damages.
From the brief article, the main legal doubts arise around what is to be understood by professional specialization and how the compensation for damages can be specified.
The first must be interpreted as “special training” that the company can pay for the employee, beyond the ordinary training included in article 4.2 b) of the WS —about the right to professional training at work— which allows the employee to carry out a specific job or project that is different from the performance of their ordinary functions. The extraordinary and special nature of this training is what justifies the limitation of the employee’s freedom.
For the second, permanence agreements usually regulate the reimbursement of all or part of the training cost assumed by the company.
The permanence agreement in article 21.4 of the WS should not be confused with the so-called retention bonuses, which address the retention of talent from the perspective of encouraging the employee to remain until a certain date, when they will earn remuneration linked to the achievement of milestones or objectives.
Unlike the permanence agreement, retention bonuses are not expressly regulated in employment regulations, and their use is established in company agreements or policies that must respect the general interpretation of case law and judicial doctrine on variable remuneration.
More specifically, one of the main keys to the configuration of retention bonuses is to justify their circumstantial and exceptional nature, and the milestone or objective(s) to which the vesting is linked. To this end, it is usually linked to the fulfilment of certain parameters within the framework of a specific transaction, project or production cycle to which the employee is assigned and which makes it reasonable to establish this type of bonus.
In short, it may be interesting to assess the use of the legal tool of the permanence agreement and the implementation of retention bonuses as measures to attract and retain talent if the specific circumstances arise. A thorough case analysis and proper setup are crucial for regulatory compliance.
Álvaro Batlle Carbó
