Hello - need advice: how do you negotiate a retention bonus? As a % of your annual gross? Your opportunity cost (another job, promotion)?

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My advice:
Calculate the indifference curve by selecting a 2 year, 3 year, and 4 year payback period.
Do this by taking the NPV of the opportunity, which is equal to what you would consider your retention bonus total.
Take the retention bonus total and calculate it as a % of your base.
Now here is the tricky part:
Most retention bonuses are 2 years. So your 2 year calc = your 2 year retention bonus. But you have 3 years and 4 years calculated anyway, if the time horizon up for negotiation also changes.
However using the 2 year as an example: your 3 and 4 year becomes what you should shape your initial position on. I.e. instead of landing at 2 years, go in at somewhere between 3 and 4. Work from there.
From the perspective of your negotiating opposition, they will always remove a risk % from 3 or 4 years, reducing the original number you calculated (the1st numbers you came up with), because as time horizons extend naturally the risk to them forces the figure downwards.

Hope this helps as a basic starting economic model for wage negotiations

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Great. Thanks a lot! Very helpful

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