Toys “R” Us is paying “closing bonuses” to keep employees around while it shutters stores

Not quite time to jump ship.
Not quite time to jump ship.
Image: Reuters/Carlo Allegri
We may earn a commission from links on this page.

A lot of people will lose their jobs if Toys R Us follows through on its plan to close around 180 stores, or about 20% of its US locations. The company admits as much in court documents filed Jan. 23, noting that planned store closures “will result in a substantial number of employees being terminated.” The closures are scheduled to begin in early February and continue through April.

It would make sense, then, if a lot of those employees started looking for other work now. But while Toys R Us can’t afford to keep everyone after it downsizes, it also can’t risk losing too much staff before the closure process—which will involve a lot of fire sales—is completed.

That’s why the company wants to pay “store closing bonuses” to store-level employees, according to a request it made in the Jan. 23 court filings:

The Debtors are requesting the authority, but not the obligation, to pay Store Closing Bonuses (the “Store Closing Bonus Plan”) to store-level non- insider employees, who remain in the employ of the Debtors during the Sales. The Debtors believe that the Store Closing Bonus Plan will motivate employees during the Sales and will enable the Debtors to retain those employees necessary to successfully complete the Sales.

Toys R Us says the amount of those bonuses will vary based on factors including the employee’s position and how each closing store performs as it attempts to unload its merchandise. The company has also proposed compensating employees with a share of their paid time off for 2018 in exchange for them not taking it while the closures are ongoing.

Such bonuses are typical for companies that are trying to retain employees and encourage high performance even as some locations are being shut down. Toys R Us says closing-store bonus payouts would max out at a combined $3.6 million, if all stores closed and hit their performance targets during final sales. The payments made for paid time off will top out at $3.2 million.

“The total cost of the Store Closing Bonus Plan is reasonable in light of competitive market practice and involves compensation structures often used in other restructuring situations to incentivize employees to continue optimal performance despite the added stress inherent in the chapter 11 process,” the company states in its court filings. “A possible loss of the employees would disrupt the Debtors’ ability to effectively close the Closing Stores and maximize value for the benefit of all stakeholders.”