Amazon Pays Employees $5,000 to Quit | Collins McNicholas

Amazon Pays Employees $5,000 to Quit

iStock_000008085689SmallI read an interesting article recently in the CIPD magazine ‘People Management’, describing how once a year Amazon offers employees in its fulfilment centres up to $5,000 to quit their jobs. The offer begins at $2,000 for new employees and increases by $1,000 a year until it reaches $5,000. The ‘Pay to Quit’ scheme was revealed by CEO Jeff Bezos in his annual letter to shareholders in May. It is a practice that originated with online shoe retailer Zappos in 2008, with Bezos becoming familiar with the idea after Amazon acquired Zappos in 2009 for an estimated $1.2bn.

Amazon is not looking to downsize, or reduce its wage burden, the headline on the announcement is ‘Please Don’t Take This Offer.’ Amazon is actually increasing its headcount and building new warehouses across the US. The reason for the ‘Pay to Quit’ scheme is to get rid of unmotivated and dissatisfied workers, and ensure that the employees that remain are committed to the company and its culture. This raises some interesting questions. What are the costs and benefits for a company over the long and short term? And, what would it say about a company’s hiring practices if lots of people decided to take up the offer?

The key to the strategy is that it forces Amazon’s employees to assess their career, their place within the organization and their level of satisfaction with their job. In doing so the vast majority, who turn down the offer, are rededicated to their job and morale improves further. Since its launch in January take up of the offer has been low, considerably below 10% according to Amazon. Zappos, which operates independently from Amazon, and is renowned for its outstanding customer service, has had, on average, 2-3% of its employees take up the offer since it began the practice in 2008. If you take into account the savings made by getting rid of unproductive employees, who often have a negative impact on the overall performance of a workplace, the ‘Pay to Quit’ scheme looks better and better. Having a happy, motivated staff is important for all businesses operating in retail and customer services industries. Better morale leads to better customer service which directly improves a company’s reputation, and increases customer loyalty. In the long run there are real financial benefits to be gained from this short term cost. My colleague Caroline Ward (Occupational Psychologist) has seen a significant increase in demand for Assessment Centres in recent months where businesses are dealing with high volumes and need to get the right staff.

The ‘Pay to Quit’ scheme demonstrates a commitment to developing a corporate culture that focuses on engaging employees at every level of the organisation and improving the quality of their customer service by assessing the contentment of their staff in an efficient way. The prospect of having to pay $5,000 to a worker should encourage HR departments to more selective in the people they hire. They must identify people who are not only capable of doing the job but also fit the culture of the company and buy into what they do in a real way. This would raise the bar for recruitment within a company and improve the quality of the workforce in the long term, bringing significant benefits to the company. With so much to gain from this approach we are left with one obvious question: could this practice succeed in Ireland?

Niall Murray, GM Collins McNicholasNiall Murray

General Manager, Collins McNicholas Recruitment & HR Services Group

Email: niall.murray@collinsmcnicholas.ie