Assume the model's US Tier 2 salary of $62,000 and its general salary burden factor of 1.25. Multiply $62,000 by 1.25 to get $77,500 a year before costs outside that factor. To budget a retention bonus, acquisition teams need to price the extra payment for staying through an agreed period or transition separately, including its actual employer costs.
I'd agree with the buyer which work needs to continue before choosing who gets an offer. Put the amount and conditions in an agreement checked for that employee and this deal. Discuss the future role alongside the bonus so the person understands what you're asking them to stay for.
Identify the Responsibility Before the Person
Start with the work that would be difficult to carry on if a particular person left. Write down why the buyer needs it. You're deciding what the transition requires before selecting someone to receive a payment.
Check who actually carries client delivery and knows the systems behind it. A title won't tell you who knows the current configuration or can handle the client handoff. Have the buyer and seller compare the work records with the roles proposed after closing.
I'd keep a short record for each person you're considering:
- Name the work that needs to continue and the records showing who does it.
- Describe the period or transition work you need that person for.
- Name the buyer-side manager for the future role and workload.
- Set out the handover or backup arrangement you need alongside the offer.
- Name who approves the offer and which employer pays and tracks it.
Choose the Offer From the Actual Transition
Tie the proposed amount to the role and the work at risk. Ask the buyer to explain why the person is needed and what budget is available. Don't calculate an award from an invented percentage of the sale price.
The MSP model doesn't set a standard retention award or payment period. Its 20% annual staff-turnover input is a planning assumption. That isn't the probability that this employee will leave after the sale, and it can't tell you what a bonus would prevent.
Compare the offer with alternatives you can actually carry out. A proper handover may need protected time and another capable person. Pay someone to stay without arranging either, and you may reach the end of the bonus period with the same dependence still unresolved.
I'd settle the discussion about future work and the manager before calling the cash offer complete.
Keep the Bonus Budget Separate From Salary
Keep the modeled $77,500 annual role cost as the ordinary compensation baseline in this example: $62,000 times 1.25 = $77,500. The general salary factor excludes bonuses. Applying 1.25 to an award won't establish what that award actually costs the employer.
Ask payroll to calculate the employer costs on the proposed bonus. Have finance identify any separate cost of running the arrangement and put its payment dates in the cash plan. Don't assume the purchase price funds an employer's promise automatically.
Incremental program budget =
proposed gross retention awards
+ applicable employer costs confirmed by payroll
+ separate administration or advice costs- Keep ordinary role pay on its own line.
- Record who funds each amount and when it is due.
The model's $5,000 cost-per-hire allowance is a recruiting input. It isn't the full cost of losing this person, so don't use it as a universal limit on a retention offer. Don't add their entire annual salary as though all that pay becomes a new loss either.
Price the cover and replacement work a departure would actually require. Separate extra costs from salary you've already budgeted. Where you can't yet estimate the impact, name what you need to find out instead of inventing a return on the bonus.
Resolve Payment Conditions Before Making the Promise
Tell your employment lawyer the proposed role and what you're trying to achieve, then have them write the terms for this deal. Payroll needs to know when to pay, and the employee needs to know what earns the money. Settle an open condition before promising it in the conversation.
| Point to Resolve | Decision the Agreement Needs |
|---|---|
| Amount and payer | State the gross award, the responsible employer, and the party funding it. |
| Payment conditions | State the agreed service or transition conditions and how completion is determined. |
| Timing | State when payment is earned and paid, including how a delayed or abandoned transaction is handled. |
| Changes to employment | Resolve what happens if the role changes or employment ends in the relevant circumstances. |
| Other compensation | Explain how the award relates to ordinary pay and any separate arrangements. |
| Questions and administration | Name the person who answers questions and the owner who confirms payment eligibility. |
Don't assume a template's forfeiture or repayment terms work everywhere. Have your lawyer check the terms for this employment relationship. A spreadsheet can total a payment; it can't settle the employment questions.
Tell the Employee What the Buyer Can Actually Confirm
Agree what you'll say with the buyer and deal advisers before approaching the employee. Bring in the person responsible for the future role where appropriate. Explain what's decided and what's still open, and give the employee someone to take questions to.
I'd keep the explanation of the bonus beside the role discussion. Say which work the buyer wants to continue and what support the person will have. Don't suggest the payment guarantees a permanent job or answers an unresolved concern about workload.
Once it's signed, name someone at the responsible employer to track the dates and conditions against the agreement. Keep the handover on the work plan too. Staying employed and passing on the necessary knowledge each need their own record.
Start with the buyer's proposed roles and the ordinary pay baseline. Identify the work you need the person to continue, cost the offer separately, and settle its terms before the conversation. The employee and buyer then have a specific arrangement to assess.
mspoutpost.com/articles/retention-bonus-acquisition-terms-msp-sellers-need
Written by Graham Whitfield
MSP Outpost publishes information, not legal, financial, insurance, tax or compliance advice, and reading it creates no professional relationship. For decisions about your business, talk to a qualified professional.