Should you pay your employees to quit?
It may seem counter-intuitive but high-performance companies are giving unhappy workers a farewell bonus. Here’s why.
You’ve hired a rock star on your team and they’ve completed their four-week training. You know they’ve got potential.
But somehow, as they enter their final week of onboarding, their performance changes. You notice they’re beginning to lose enthusiasm and are stumbling in their tasks. Soon, questions arise that make you rethink, is this new hire the right fit?
That’s a concern that some employers are now addressing with an unconventional tactic: why not pay unhappy and underperforming employees to quit?
It’s a method popularised by the late Tony Hsieh more than a decade ago, when he was CEO of online retailer Zappos. “The Offer” as it was nicknamed gave new hires the option to leave with a US$4,000 bonus on top of their pay for their four weeks of onboarding.
“If they know they don’t quite mesh with our culture, we don’t want them to feel stuck here, so we give them an option,” the company said.
Yet even with the option of cashing in and quitting, most Zappos recruits chose to stay on. Only a minority 2-3% of newbies actually accepted “The Offer”.
“We want to make sure that employees aren’t here just for paycheques and truly believe this is the right place for them,” Hsieh told Business Insider in 2016.
The strategy reportedly paid off for Zappos that when the retailer was sold to Amazon in 2009, Amazon retrofitted the policy. This time, “The Offer” was rebranded into the “Pay to Quit” programme.
Full-time associates who have been with Amazon for at least a year may opt to quit in exchange for up to $5,000. But once they decide to leave, they will also be signing away any chance to re-join the Amazon workforce in the future.
“In the long-term, staying somewhere you don’t want to be isn’t healthy for our employees or for the company,” an Amazon spokesperson told CNBC.
But while Zappos opened the programme only to their new hires, Amazon offers the farewell bonus even to their long-serving employees.
Of course, nobody wants to spend time, money and energy screening, hiring and onboarding an employee only to hit a dead end after a few weeks and paying them to be on their way.
Amazon’s memo detailing the “Pay to Quit” offer uses the phrase “Please Don’t Take This Offer” as a call-to-action in its subject line.
“The goal,” Bezos once told shareholders, “is to encourage folks to take a moment and think about what they really want.”
In Australia, the Fair Work Ombudsman allows employers to determine the duration of the worker’s trial period, but it also usually lasts anywhere from a few weeks to a few months.
“If an employee doesn’t pass their probation, they are still entitled to receive notice when [their] employment ends [and] have their unused accumulated annual leave hours paid out,” the FWO says.
This is why it’s important for employers who are offering the cash incentive to clearly define the time frame of the programme.
The coverage period of most pay-to-quit offers will likely coincide with the employee’s trial period. Paying out a farewell bonus won’t actually create friction between the employer and the new hire.
But other schemes – like the one at Amazon – are open to employees who have been with the team for at least a year.
In cases like this, employers need to be careful in phrasing the terms of their exit offer. If managers single out underperforming tenured employees – asking them to leave without first searching for options to improve their performance – then they might give the impression that the company is only looking for a way to push the employee out. In the end, the company could face legal setbacks.
Having an employee resign involuntarily can be construed by some courts as unfair dismissal.
“If an employer asks someone out of the blue to resign, they are opening themselves up to discrimination claims, general protection claims, and all sorts of legislative breaches,” said Erin Lynch, former director of People + Culture Strategies, in an interview with HRD.
For tenured employees, a pay-to-quit offer might work the way bonuses are sometimes added to a severance package.