What Are "Golden Handcuffs," Exactly? Learn What It Means, and How to Break Free

Being compensated well—and fairly—is extremely important for women in the workplace. But while you, of course, want to work for a company that offers competitive compensation packages, it’s also important to make sure that company isn’t trying to use compensation as a way to manipulate or influence your decisions, or to lock you into a job you don’t want or love—a.k.a. putting you in “golden handcuffs.”

“Golden handcuffs can be a blessing and a curse,” says Sandie Briscoe, CEO of Florida-based HR consultancy The HR Initiative. “They can provide financial stability and security, but they can also trap people in jobs that they don’t like.”

Let’s take a look at everything you need to know about golden handcuffs: what they are, why companies use them, how they’re particularly challenging for women, and how to break free from those handcuffs—and not let a salary or compensation package keep you in the wrong career.

The meaning of “golden handcuffs”

Simply put, “‘golden handcuffs’ is a term that is typically used to describe an incentive program with the goal of employee retention,” says Kate Conroy, a senior consultant at the New Jersey-based HR consulting firm Red Clover.

More specifically, “golden handcuffs” is a term often used to describe an unattractive job (for example, a 60+ hour per week role at a company with a toxic work culture) with an incredible compensation package—often more generous than other roles with similar requirements.

When people start working in one of these roles, they often feel stuck. While they’re not happy at work (and, in fact, may be actively unhappy, overwhelmed, or burned out), they financial opportunity makes it hard for them to walk away, essentially locking them in their role.

“The threat of immediate loss of substantial financial benefits can be a significant deterrent, making employees feel trapped—even if they are unhappy,” says Briscoe.

While the concept of golden handcuffs is often associated with high-level executives, in today’s work culture, employees of any seniority (including entry-level employees!) could find themselves in a golden handcuffs situation. 

The different types of golden handcuffs

Golden handcuffs is a blanket term used to describe leveraging financial incentives to keep talent in a specific role and/or organization—even when they’re unsatisfied with their experience. Companies can put employees in golden handcuffs in a variety of ways, including:

• High starting salaries: One of the ways that companies can lock talent in from the get-go is to offer starting salaries that are significantly higher than competitors. For example, finance and tech companies often recruit recent college grads, offering them a starting salary that’s thousands (or even tens of thousands!) of dollars higher than competing industries. When employees start with a higher-than-average salary, many quickly get used to being compensated at that level—making it hard to walk away from the position.

• Restricted Stock Units (RSUs) and Stock Options: “These are shares or options to purchase shares granted to an employee, which vest over time,” says Briscoe. “If an employee leaves the company before the vesting period is over, they forfeit those shares or options.” The threat of losing their shares or options is often incentive enough for people to stay in their job until the vesting period is over—essentially locking them into golden handcuffs.

• Benefits: Competitive benefits, like 100% paid health insurance for employees and their family members or a high 401(k) match can also incentivize employees to stay with a company, even if they’re unhappy in their role.

• Access to perks: Not all compensation is in the form of money. High-level perks that most companies don’t offer—like on-site massage therapists, a company car, or access to corporate vacation properties—can also be used as a form of golden handcuffs.

• Retention bonuses: “These are monetary bonuses offered to employees to stay with th company until a specified future date or until the completion of a significant project,” says Briscoe. “The bonus is typically forfeited if the employee leaves before this date.”

• Non-compete clauses: Not all golden handcuffs offer direct compensation. Some lock you in to your role by threatening your ability to make money elsewhere—a.k.a. a non-compete clause. Even if an employee can afford to leave a job, non-compete clauses can restrict their ability to work in their field or region, making it challenging to find a new position,” says Briscoe, threatening both their career prospects and financial security.

Why do companies offer golden dandcuffs?

Companies that use the golden handcuffs strategy use compensation as a way to drive employee retention. There are a few reasons employers may use this strategy, including:

• The costs of hiring and training new employees. There are significant costs associated with hiring and training new employees. Those costs can often be higher than offering competitive salaries and/or other financial incentives—so many companies would rather pay higher salaries and other financial perks than have to continually invest in finding and hiring new talent. “Companies often invest significant resources in training and developing employees,” says Briscoe. “Golden handcuffs can help ensure a greater ROI by requiring employees to stay for a certain duration.”

• The threat of losing top talent. The right team can make or break an organization. Many companies use golden handcuffs to attract and retain top talent—and deter them from taking a job in another industry or with a competitor.  “Highly skilled and valued employees are in demand, and other companies may attempt to poach them,” says Briscoe. “Golden handcuffs are a way to ensure these employees have a longer tenure.”

• Recognizing that the company/role itself has retention issues. Many executives recognize that either a) their organization is not a great one to work at, or b) certain roles within their organization aren’t attractive to many prospective employees (for example, the role might be extremely stressful or require regular work on nights and weekends)—and, as such, they may have trouble keeping people with the organization/in a certain role. As a way to overcome those retention issues, companies may offer golden handcuffs-level compensation—with the idea that if the company and/or role isn’t going to attract or retain talent, at least the compensation package will.

It’s important to note that different companies have different reasons for how they structure their compensation—and not all companies that offer competitive compensation packages are trying to lock their employees into golden handcuffs. There are plenty of companies that compensate their employees well because they’re invested in their employees health, happiness, and well-being—and know that when employees feel like they’re being compensated properly, they’re more likely to both perform at a higher level and be more committed to the organization.

How golden handcuffs impact women

Golden handcuffs can, in many situations, be problematic—but they can be especially problematic for women.

The gender pay gap is real. (As of 2022, for every dollar men made, women only made 82 cents.) And because women make less money than their male counterparts, they’re even more likely to get trapped in a golden handcuffs situation—since their opportunities to make a high level of compensation elsewhere may be limited.

“The persisting wage gap means that women often earn less than their male counterparts for similar work. This disparity can make the financial incentives of golden handcuffs even more binding for women, as the financial benefits represent a larger proportion of their income,” says Briscoe.

In addition, “women are typically less likely and less comfortable negotiating compensation than men,” says Conroy. “As a result, women may be more impacted by the practice of golden handcuffs.”

Certain benefits may also act as golden handcuffs for women in a disproportionate way. For example, since Roe v. Wade was overturned and women’s reproductive rights have been threatened, women living in states where abortion has become illegal may only consider working for companies that offer abortion benefits (like a stipend to cover travel costs to a legal state)—even if the company or role isn’t ultimately the right fit.

How to break free from golden handcuffs

If you ever find yourself in a situation where you feel locked into a job with golden handcuffs, there is some good news. There are ways to break free and find a job that feels right for you—even if it’s at a lower level of compensation.

Some strategies you might consider to escape a job where you feel trapped in golden handcuffs include:

• Know your rights. “Review your state and local laws to see when compensation is considered earned,” says Conroy. “You may have a right to this compensation, even if you leave.” 

• Review your budget. When you’re compensated at a certain level, you get used to spending at that level. But there could be opportunities in your budget to cut spending—which would make taking a pay cut more feasible. If you’re looking to leave your high-stress/high-compensation job, review your budget and look for ways (if there are any) to minimize spending (for example, opting to pack lunch instead of eat out or canceling your gym membership in favor of free outdoor workouts).

• Consider the costs of keeping your job. Sometimes, when you take a deeper look at things, keeping your golden handcuffs job might have more costs than you think. For example, if you have to seek out therapy to deal with the stress of your job or you’re constantly getting sick (and have the medical bills to show for it), those additional costs might be equal to (or more than!) the difference in salary between your current job and a job with a lower salary—but without the added expenses. If you need encouragement to leave your golden handcuffs situation, tally all the ways your current job is costing you (including time, money, and energy); seeing all the costs on paper can be the kick you need to make a move to a different job.

• Research high-paying alternatives. As mentioned, not all companies with competitive compensation packages are aiming to trap employees in golden handcuffs—so, you might not have to take a pay cut in order to have a better experience at work. Research companies that both highly compensate their employees and have a reputation for a positive work culture and employee experience—and then try to get your foot in the door. And make sure to negotiate! “Don’t be afraid to ask for a salary that is fair and in line with your experience and skills,” says Briscoe.