Golden Handcuffs: Definition, Benefits, and Examples

Article Summary

Golden handcuffs refer to benefits awarded to valued workers, either for recruiting purposes or to encourage employees to stay with the company. These are not your average benefits. Golden handcuffs are usually awarded to highly compensated employees and can include big financial incentives such as annual bonuses, stock options, company cars, or vacation homes.

It’s fairly standard for many business owners to offer a variety of benefits to their employees. Normal offerings usually include paid vacation, sick time, medical insurance, and possibly some type of retirement plan.

Golden handcuffs take benefits to the next level, which your average employee will probably never experience. They encourage workers to stay with their current employer for an extended period of time and also help to attract new talent.

How golden handcuff agreements work

If a company wants to attract high-quality talent to their business, they often need to provide extra incentives to encourage employees to come on board. This is especially true in a tight labor market like today, where top employees can receive multiple offers from competing firms.

In other cases, golden handcuffs might be offered to high-performing employees to encourage retention and avoid staff turnover. If you’re a business owner with key employees who have specialized skills, you will naturally want to retain them, and that often calls for added financial incentives.

Sometimes golden handcuff benefits are awarded upfront, with the agreement that an employee meets certain stipulations. This might mean employees are required to stay with the company for a certain number of years or that they meet other revenue-related goals for the business.

Other financial incentives might only kick in at certain milestones. For example, employees might get a bonus after six to 12 months of exemplary employment. Or, they might receive stock options, but would only be fully vested after five years. This way, if they choose to leave the company prior to the specified time frame, they would only get a portion of the golden handcuff benefit.

Types of golden handcuff benefits

Not all companies offer the same kind of golden handcuffs benefits. Whereas one massive corporation may offer incentives like a company car, a smaller company may opt for a yearly bonus. Below are some of the most common types of golden handcuffs.


Golden handcuff bonuses are commonly awarded quarterly or annually. This means more money in addition to an employee’s regular annual salary. It could be a guaranteed set amount, which is often the case with high-ranking executives, or dependent on financial goals met by the firm.

Supplemental retirement plans

As a matter of company policy, a corporation often provides retirement plans to its employees. This is usually in the form of a pension or 401(k) program. Top employees, however, might be eligible for supplemental executive retirement plans (SERPs) on top of the usual retirement package.

Typically, the company will negotiate a set amount. The employee can then withdraw the money upon retirement, based on whether they meet certain requirements. At that point, they will need to pay state and federal taxes on the benefit.

Stock options

Giving employees corporate stock is another common type of golden handcuff. Offering employees a solid stake in the company provides a direct financial incentive for top talent to not only stay with the firm but to work even harder to ensure its continued profitability.

Not sure if stock options are worth staying for? You may want to speak with an investment advisor to determine what your best choice may be, even if that means leaving your current position.

Insurance policies

While many firms provide medical and dental insurance, employees usually have to pay a portion of the premiums themselves. A golden handcuff version of health insurance could include a fully subsidized plan — meaning no out-of-pocket costs for the employee.

Valued workers might also be offered a generous life insurance policy. That might not mean a lot for single employees, but can be a valuable benefit for those with families.

Other benefits

In addition to the more elaborate golden handcuff benefits, there are many other perks that firms may offer to help encourage employee retention. These could include gym memberships, tuition reimbursement, unlimited paid time off, complimentary lunches, free box seats to professional sports, or even beer on tap in the break room.

These days, another extra benefit is offering more flexible working conditions. This could mean giving employees the option to have more adaptable schedules or hours that can better accommodate their work-life balance.

Of course, there is the possibility of working from home, which is increasingly attractive for many workers. Companies that want to remain competitive are realizing that retaining top talent means allowing for more flexible schedules.

Advantages of golden handcuffs

Though a company may offer golden handcuffs to top-performing employees for a variety of reasons, these benefits are mostly used for the following reasons.

Recruiting employees

When trying to recruit new talent, offering golden handcuff benefits is a way for companies to stand out from the pack. All things being equal in the salary department, giving out annual bonuses and company cars provide employees with a more compelling reason to choose one firm over another.

Showing appreciation for existing employees

When a company rewards its top performers for their specialized skills and contributions, it breeds goodwill on both sides of the coin. People want to be acknowledged for their hard work, and offering financial incentives to those who do a great job encourages company loyalty while also showing appreciation for that work.

Employee retention

Finally, in many competitive industries, such as the tech sector, it can be tough to get employees to stick around. By offering a variety of golden handcuffs to top performers, a company is more likely to hold onto its talent for at least a certain period of time.

Pro Tip

When considering golden handcuff offerings, be sure that you don’t get locked into a situation that’s nearly impossible to extricate yourself from. Remember, companies are competing for your talent, and you may want to negotiate for a less restrictive arrangement.


Are golden handcuffs worth it?

Golden handcuffs can be well worth it because the extra money and perks can substantially add to your bottom line. For example, if a firm offers company cars to its key employees, that’s a major expense taken care of, and you could be eligible for a new vehicle every few years.

But there is also a negative connotation to golden handcuffs to consider — that they cause people to stay in jobs they don’t really like for an extended period of time. If they leave before that time period is up, it could mean a significant reduction in income through the loss of those golden handcuff benefits.

How do you break free from golden handcuffs?

Golden handcuffs are put in place for a reason, which can make them difficult to wriggle out of without taking a significant loss. In some cases, you might even have to sign a non-compete clause to be eligible for the extra benefits.

However, there are different ways to work golden handcuffs to your advantage. For instance, if you like your job but you don’t love the office, you might be able to negotiate a flexible schedule where you work from home full- or part-time. Not having to spend all that time and money commuting to a workplace where you don’t want to be could be considered pretty high compensation.

How long do golden handcuffs last?

The time frame of golden handcuffs varies by company and by benefit. For example, you might need to stay until retirement age to collect the full amount from a supplemental executive retirement plan. Stock options, on the other hand, might only take a few years to be fully vested, which means you could walk away with that benefit fully intact.

Are golden handcuffs taxable?

Yes, in many cases golden handcuffs benefits will be taxable. For example, if you sell your stock options for a profit, you will have to pay capital gains tax on that money. Similarly, if the stock pays dividends, you will also be taxed on those funds as income.

Key Takeaways

  • Golden handcuffs are benefits most commonly awarded to highly compensated employees.
  • Benefits included with golden handcuffs might include a company car, an annual bonus, a supplemental executive retirement plan, or all of the above.
  • Golden handcuffs are meant to either retain valuable employees or attract new talent.
  • A negative connotation of golden handcuffs is that they can effectively force workers to remain in a job they’re not happy with. Even if they can get out of them, they could face a significant pay cut.
View Article Sources
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  7. Best Startup Business Loans (Even If You Have Bad Credit) — SuperMoney