Key Employee Retention Plan [KERP] Law and Legal Definition

Key Employee Retention Plan (KERP) refers to a benefit plan employed by a debtor company in bankruptcy cases as incentives to upper management to continue working for the company throughout the bankruptcy. The purpose of this KERP is to aid in the retention of certain key qualified and competent executives of the company and its subsidiaries, by providing a retention bonus for such employees in consideration of their continued employment pending the restructuring of the company in bankruptcy.

The following is an example of a case law on KERP:

The KERP aims to retain qualified officers, employees, and directors of the company and its subsidiaries upon whose judgment, initiative and efforts the company largely depends for the successful conduct of its business, to acquire a proprietary interest in the company. It is anticipated that providing such persons with a direct stake in the company's welfare will assure a closer identification of their interests with those of the company, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the company. [Holbrook v. Gentek, Inc., 2010 U.S. Dist. LEXIS 67985, 4-5 (D. Mich. 2010)].