what's A Key Employee?

A key employee is an employee with a major ownership and/or decision-making role in the business. Key employees are usually highly compensated. They may also receive special benefits as an incentive both to join the company and to stay with the company.

A key employee may be considered to be an intrinsic part of a company’s operations. Such an employee could be influential in securing capital for the business, which may occur through their connections or by virtue of their work. For example, the employee may hold a role tied directly to sales channels for the company, intertwining their performance and business activities with the cash flow.

The employee might be the top-performing salesperson at the company, driving a significant portion of the regular revenue. The employee, for a variety of reasons, may represent a public face associated with the company’s brand and is thus seen as crucial to maintaining the investment and support of shareholders and customers.

The company may define the work of the employee as vital to the infrastructure and operation of the business, even though that employee may not have a highly-visible role in terms of the public or outside business relations. For instance, the chief scientist on a team developing a novel new product expected to be a mainstay behind the business’s revenue and income could be regarded as a key employee.

When key employees do not receive necessary support, coaching, and feedback needed to excel in their role, they will leave. When a key employee leaves a company, it causes major disruption to the business, damages customer confidence, as well as causing substantial morale and financial harm.

Key employees need to be assured that they will have the support, feedback and coaching needed for them to excel in their role. If not, it could take up to half a year and up to 200% of the annual salary to find a key employee replacement.