Quitting for money

Pay-to-quit schemes offered by some U.S. firms may not be practical in Canada
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 05/20/2014

Would you offer your employees money to quit? Every year, staff could have the option of taking a lump sum payment and leaving the company.

It’s an intriguing idea, one that Amazon and Zappos in the United States have embraced. Zappos offers new hires $2,000 to quit — though less than two per cent of its employees have accepted the offer.

“We really want everyone at Zappos to be here because they want to be and because they believe in the culture. 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,” said the Zappos website.

And Amazon, which acquired Zappos in 2009, has followed suit. Its Pay to Quit program, for Amazon fulfillment centre employees in North America, offers employees $2,000 to start and up to $1,000 per year, until $5,000 is reached. And, again, only a small percentage of workers participate.

“The headline on the offer is ‘Please Don’t Take This Offer.’ We hope they don’t take the offer; we want them to stay,” said Jeff Bezos, founder and CEO of Amazon, in a letter to shareholders.

“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.”

It might sound simple, but there are a few hitches when it comes to Canada. For example, if an employee quits his job, he is unlikely to receive employment insurance (EI) benefits. So any worker who takes his employer up on the offer forfeits that security — unless he conveniently has another job lined up.

There’s also the possibility an employee could later claim she resigned under duress, according to Claudine Kapel, principal of Kapel and Associates, a Toronto-based HR and communications consulting firm.

“There are some complexities and because of the whole EI eligibility, there is the possibility that there might not be a big uptake from the employee side, as well as some risks from employment standards and human rights and whatnot on the employer side, that might make such a program not necessarily as readily appealing than might be the case in the U.S.”

If, somehow, the offer was treated as a layoff, with a $5,000 payoff, there are all kinds of legislative considerations in terms of notice and severance that could yield the employee a bigger dollar value than the payout, she said.

“The theory would be if they could quit on their own, it would save you the aggravation of having to deal with a disgruntled employee and, potentially, save you money because you wouldn’t have to sever them and pay severance and all those kinds of things, so it’s kind of like an avoidance strategy for some of those other types of interventions.”

Whether these pay-to-quit policies can be lawfully imported to Canada would really depend on how they’re implemented and used, according to Craig Stehr, a lawyer at Nelligan O’Brien Payne in Ottawa.

“There certainly would be implications in terms of severance and in particular EI and employment insurance but… Canadian employers should not view pay-to-quit programs as an alternative to terminating employees,” he said.

“The decision really does have to remain with the employee in order for these payments to remain lawful and not run counter to the obligation to provide reasonable notice or pay in lieu of that notice.”

Any employer looking to implement such a program needs to be cautious, said Stehr.

“The policy needs to be applied across the board in a uniform way,” he said. “Failing to do that could lead to employees being unintentionally or perhaps intentionally targeted and result in a constructive dismissal claim by the employee… Employers would also likely want to ensure the employee is providing full and final release in respect of any potential claims against the employer.”

Organizational benefits

But a pay-to-quit program could make sense during the training period because it can save an employer money, said Steve Fanjoy, senior partner, consulting and training, at Fanjoy & Associates in Edmonton.

“It’s good for these people looking at jobs because then they may figure out… ‘This really isn’t the type of work I want’… and there’s no pain for them because they get paid to go and they also don’t get anything negative in terms of references. It’s a little bit of self-awareness, understanding what it is they’re looking for.”

A pay-to-quit program is also a good tool for intelligence-gathering, he said.

“That gets into engagement, job satisfaction, the culture people are looking for,” he said. “When you’ve got people who are happy — and this is where most organizations fail — you want to find out ‘Well, why are they staying, what is it they like about their job?’ Because you want to repeat that, you want to build that sort of a performance culture, so it can be like a stay interview.

“You’re saving a lot of money because you’re getting people who want to be part of the system and… if your employees are satisfied, they deal better with the customers or the clients and that makes you more money.”

It’s also unlikely people would job-hop to take advantage of the program because it would come back to haunt them, said Fanjoy. And this approach ties into recruiting practices because it helps employers figure out if they are doing the best job of finding people.

The application of such a program would be fairly limited in Canada, said Stehr, but for the strategy to work effectively, an employer would need to have a desirable, high-commitment workplace with a strong corporate culture and positive brand.

“And, of course, any employer implementing this type of policy would need to have an effective screening process at the time of the hire, otherwise it could be quite a costly policy of the employer if it’s not selecting the ‘right’ employee,” he said.

Pay-to-quit programs are a potential talent management tool and could be quite successful in the right workplace, said Stehr.

“It can be quite empowering, if it’s done correctly, for the employee to have a mature assessment of what that employee sees as his or her future with the company, provided there is not any true pressure coming from the company for that employee to depart.”

Zappos and Amazon apparently have fairly intensive development of employees at the outset of employment, and those are essential components to this type of policy, said Stehr.

“It sends out the message that the employer is so confident in its work culture and its positive treatment of its employees that it’s prepared to let employees assess the value of that work moving forward. In the wrong corporate culture, this could be quite problematic and quite an expensive policy decision.”

While it may not be viable to institute an identical program, there is value in understanding the more subtle mechanics, said Kapel.

“Basically, what they’re doing is getting employees to consciously choose to remain with the company and, in doing that, the organization is reinforcing its desirability as an employer, so it’s strengthening its employer brand,” she said.

“You really do want employees to have that conscious sense of connection to the organization, to feel positive about their choice to remain employed there, so there’s certainly a benefit to finding mechanisms, whatever they may be, to foster that…. in that moment where they say, ‘Yes, I’m going to stay,’ they sort of reaffirm the commitment to the organization, which is a valuable exercise.”

Add Comment

  • *
  • *
  • *
  • *