Golden handcuffs are pay arrangements that make leaving expensive: money or equity an employee only keeps by staying, such as unvested stock, deferred bonuses and retention bonuses that must be repaid on early exit. The term is the opposite of a golden handshake, which pays someone to go.

The usual forms in India

• Unvested equity: ESOPs at startups and RSUs from foreign parents of Indian subsidiaries, released on a vesting schedule and lapsing on resignation.
• Deferred bonus: part of the annual bonus held back for one to three years, a form of deferred compensation.
• Retention bonus: a lump sum paid on a future date, common during acquisitions and large projects.
• Joining bonus with payback: repayable in full or pro rata if the person leaves within 12 or 24 months, enforced through a clawback clause.

Counting what someone would walk away from

A product manager at a Bengaluru SaaS firm has 600 unvested RSUs worth about Rs 2,000 each (Rs 12,00,000), a retention bonus of Rs 3,00,000 due in eight months, and a deferred bonus tranche of Rs 2,00,000. Leaving today costs her Rs 17,00,000 before tax. That figure is what a competitor has to buy out, usually with a large sign-on bonus or a fresh grant, and it is why handcuffs mainly lift the price of hiring someone away rather than stop it.

Handcuffs also have side effects. People who stay only for a vesting date tend to coast until it passes, then leave together, so stagger vesting and refresh grants. And they keep everyone, including the people you would rather lose.

On tax, a retention bonus is salary taxed when it falls due or is paid, whichever is earlier (Section 15 of both the 1961 Act and the Income-tax Act, 2025). A sign-on amount received from a new employer before joining is “profits in lieu of salary” (Section 17(3)(iii) of the 1961 Act; Section 18(1)(b)(i) of the 2025 Act), so it goes through salary TDS as well. Unvested equity is not taxed until it vests or is exercised.

Frequently asked questions

Can an employer stop someone from resigning because of unvested ESOPs?

No. Handcuffs only make leaving costly; the employee can still resign by serving the notice period, and the unvested portion lapses under the plan.

Can a joining bonus be recovered if the person leaves early?

Only if the offer letter says so clearly. Recovery from final dues can be disputed, so set out the amount, pro-rating and repayment method in writing.

Do handcuffs work for non-senior staff?

Less often. For most employees, pay growth, a good manager and career moves keep people longer than a deferred sum, which a regular check of retention rate by team will usually show.

For the cash an exiting employee is actually owed, see our full and final settlement process.