Should you pay your employees to quit?

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.

Read more: Company offers employees $25,000 to quit

Amazon’s ‘Pay to Quit’ programme
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.”

Read more: Paying new employees to leave?

Is your new hire a cultural fit?
Some employers have even upped the stakes.

In 2014, gaming company Riot Games offered new hires a bonus of 10% of their salary, maxing out at $25,000, if they felt they weren’t a good fit.

The company clarified that it wasn’t trying to “dare” new recruits into leaving, but only wanted to give people a “well-lit, safe exit path”.

“Rather than allow mismatches to fester, we want to resolve them quickly,” the company said.

“If someone gags on the unique flavour of our culture, they’d be doing themselves and the company a disservice to hang on just for the paycheque.”

Other companies use a different approach. Health technology firm eClinicalWorks doesn’t pay the employee outright, but gives them time to think things through.

If CEO Girish Navani is dealing with an underperformer, he sits down with them and says: “It’s not working out. Take three months, and go look for something else that you want to do. And if you can’t find it after three months, then you’ll need to change the way you work here.”

“Sometimes they find something, and sometimes they say at the end of three months, ‘I think I’d rather do it the other way.’ Both are good options because they give you the result you seek,” Navani told The New York Times.

One thing employers need to remember is the intention behind their pay-to-quit programme. Any offer for employees to leave should ultimately work towards retention and serve to strengthen corporate culture.

“When you think about culture, it’s made up of motivation and behaviour, and you need to get your design right in order to create a strong culture,” said Dr. Jason Fox, author of The Game Changer, which explores the science of motivation in influencing culture and behaviour.

Companies like Zappos, Amazon and Riot Games know: “People who are not connected to their values and culture will take the money and leave,” Dr. Fox said. In the long run, these people aren’t the kind of employees they would want to keep anyway.

Researchers, however, point out that the Zappos-inspired (dis)incentive works like a double-edged sword.

“[It] can be optimal for a firm to offer an exit bonus because it promotes self-selection of unmotivated workers out of employment,” said Professor Robert Dur and Dr. Heiner Schmittdiel of the Erasmus School of Economics.

“On the other hand, this practice can be dangerous because it may attract workers without intentions to remain with the firm,” they said. “The exit bonus needs to come as a surprise for workers in order to function.”

Read more: Is it ever okay to ask an employee to resign?

Should you offer a pay-to-quit bonus?
Most pay-to-quit programmes are incorporated in employment agreements with new hires, as part of their onboarding or probationary period.

In most provinces in Canada, the period typically lasts up to three months. The employee is tested to “enable the employer to ascertain the suitability of the employee for its purposes” (Mitchell v. The Queen, 1979).

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.