People & Culture
6 minute read

Why paying people to quit makes sense

exit sign

Paying people to quit might sound odd - but in fact, it’s great for your culture, employee engagement, and your bottom line.

Online shoe retailer Zappos is famous for its culture, its exceptional customer service, and its meteoric growth. But it is perhaps most famous for “The Offer.”

About a week into its month-long training program for new hires, Zappos offers each recruit $5000 to quit[1]. This policy has proved so successful that, when Amazon acquired Zappos back in 2009, they introduced it themselves. Here’s why it makes sense.

1. Paying people to quit actually saves you money.

As many as 23% of your new hires will leave within the first year[2]. While there are ways that you can improve your retention rates - better onboarding processes, a strong learning program, clear opportunities for career development - it’s inevitable that some of your new employees will be out of the door before their first year anniversary.

Hiring the wrong people is not only a missed opportunity - it can be expensive . By paying people to leave quickly, Zappos saves themselves the substantial costs of onboarding and training new hires who aren’t fully committed to the company. Tony Hsieh claims that only 2-3% of new hires take the offer - meaning that by paying people to quit, Zappos actually substantially increases their retention rates.[3]

2. A quitting bonus can increase performance and engagement.

The secret to higher business earnings? Engaged employees. Gallup research found that companies with more engaged employees had 147% higher earnings per share than their competitors[4].

By offering employees an incentive to quit, Zappos ensures that employees who stay have carefully considered their decision and made a real commitment to the company. As a result, they are more engaged and dedicated. As Zappos CEO Tony Hsieh puts it,

“The biggest benefit [of the quit bonus] is not that it sorts out people who don’t believe in the long-term vision of what Zappos stands for, although that is important. The biggest benefit comes from all the people who decide not to take the offer. Those people had to go home, think about whether this was a company they were prepared to commit to, talk about it with their family and friends. They wind up more engaged than they would have been if we had not offered the chance to leave[5].”

3. It’s great for the company culture.

Paying people to quit means that all those that stay have really bought into the company culture. The remaining new hires value working for Zappos more than they value quick cash in hand. This reinforces the message that Zappos is a company they all believe in.

As a result, Zappos employees become enthusiastic ambassadors for the Zappos brand - in 2008, over 400 Zappos employees were actively promoting the company on Twitter, driving sales by giving the company a human face and filling up their recruitment pipeline[6].

What’s more, paying people to quit also reinforces Zappos’ values to the employees that stay. By giving a bonus to employees even when they decide to leave, Zappos makes a clear statement to all their staff: “We value you, and we will treat you fairly even once you decide to move on”.

Employees watch closely to see how companies handle offboarding when their colleagues leave, whether voluntarily or not. A kind, sensitive offboarding process is therefore a critical part of a winning employee experience - and it can deliver up to 14% higher employee retention and 11% higher performance in the remaining employees[7].

Are you curious about implementing a Pay to Quit scheme? Have you had to let employees go during probation? Or noticed that some of your new hires have passed their probation period - and then begun to coast? Then read our next post  and find out how to set up a Pay to Quit program the right way.

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