HR Management, HR News & Trends

What Is Engagement Worth? Amazon’s Pay to Quit May Let Us Know

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The cost of turnover is estimated at 150 percent of an employee’s annual salary. But what if you could spend just $5,000 to find out which of your employees are engaged, and which ones are thinking of leaving?

That’s what Amazon is trying with its new “Pay to Quit” initiative, an unorthodox retention method borrowed from Zappos, another online retailer and Amazon subsidiary.

“Pay to Quit”

The idea is simple: once a year, Amazon will offer to pay associates to quit.

The first offer is $2,000, and then it goes up $1,000 a year until it reaches $5,000. Amazon CEO Jeff Bezos announced the new program in a recent letter to shareholders, where he went into more detail about the philosophy behind it:

The goal is to encourage folks to take a moment and think about what they really want. In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.”

While this is true in a business sense, it might seem questionable to offer cash bonuses for employees to quit. That is, until you factor in Zappos’ 97 percent retention rate achieved through a similar program.

What can account for its success? A few observations:

1. An unproductive employee costs far more than $5,000

It may seem like a hefty offer, but when you consider that disengaged and unproductive employees cost the U.S. economy $450-$550 billion a year, you begin to see the method to Amazon’s madness.

Yes, it is more valuable to lose disengaged employees for up to $5,000 than it is to keep them on for the months or years it may take for them to leave on their own volition.

2. It encourages automatic self-evaluation

The business world is constantly scolding itself over the importance of employee self-evaluation and goal-setting, yet it’s notoriously difficult to motivate employees to do it in earnest.

The $5,000 incentive is a respectable enough amount to compel the employee to seriously evaluate their goals within the company — how valuable is that to an organization?

3. It creates a positive dialogue with employees

In a sense, Amazon is telling employees “We respect your time.”

Too often employees in bad work situations can feel like prisoners without a voice, and never express their misgivings. “Pay to Quit” reaches out to those employees, in essence telling them they are not forsaken.

Ironically, this simple act of compassion can increase engagement and bring on positive discussions about improving the workplace.

True value

“Pay to Quit” is certainly not for everyone. Companies like Amazon with a few extra billion to burn can get away with experimental incentives.

But in Amazon’s case, where they have thousands of employees in high-turnover positions at fulfillment centers all over the country, it manages to improve on several aspects of employee engagement in one fell swoop, and that’s something you can’t put a price tag on.

This was originally published on the Michael C. Fina blog.

Cord Himelstein is the VP of Marketing and Communications at Michael C. Fina, a leading provider of global employee recognition and incentive programs headquartered in New York that has been family-owned and operated since 1935. Contact him at chimelstein@mcfina.com.
  • Bhavana Sharma

    Good but I believe that normally companies are already doing the same.Find out from the bell curve who is working out or not . Offer him to resign with 1-3 months pay. HR does that regular pruning to save the company from stagnation. But all I can say that however much you try , making it sound positive is a huge challenge…..

    • Mo Hall

      Interesting, Bhavana. I didn’t realize this practice was becoming more the norm. The positive spin here could be the offer itself–otherwise employers could simply terminate low-performing employees. The difference lies in giving the employee the choice.