Why the Retention clause for IT firms

Why the clause?
Clients are not willing to accept excuses about project delays on account of attrition. Nor are they willing to foot financial losses resulting from delayed delivery.
What is the clause
To make enterprises responsible for retaining people/teams working on the client's projects. Failing that, they would attract a financial penalty.
A usual retention clause would include:
  • Clients and providers agree on a minimum retention of 85% of those on a project for 18 to 24 months.
  • Any break in this could attract a financial penalty amounting to 10% of the monthly invoice.
  • The providers are also obligated to keep their clients posted on any possible exit of anyone in the team and what would be the alternative arrangements.
Effects
Apart from improving on the quality and schedules of deliverables, it will also reduce practice of internalpoaching — shifting people from a dedicated project to unrelated projects.
- Contributed by Ankita Sinha