Paying an employee to quit. Does it make any sense at all? Big time, and not just because Amazon says so.
Amazon offers employees at their fulfillment centers after their fi...$2,000 if they wish to quit. That payoff climbs by $1,000 each year until it caps out at $5,000. Of course, the headline of the money-to-quit contract offered to employees is “Please Don’t Take This Offer.”
The truth is Amazon does want employees to take the offer, or at least some employees. Because if enough low-performing employees do, the worth to the company is millions of dollars a year.
Want some numbers? The salary of the average employee at an Amazon fulfillment center is not readily available, but let’s says it is around $40,000 a year. But the value that employee brings back to the company can change drastically – a bad employee could only be bringing in $30,000 a year in value (meaning they are actually costing the company money to have around) while a good employee can be worth at least three times their salary.
That’s a $90,000 annual difference a good employee and a bad employee. Now, most employees who are willing to take a $2,000 to $5,000 buyout either hate their jobs or would rather be doing something else, likely meaning they are among the weakest of employees. Certainly among the least motivated. So if they take the $5,000 buyout, it could actually be saving Amazon (when factoring in the potential of hiring a new, strong employee) up to $80,000 that year alone!
On top of all that, as CEO Jeff Bezos described, it forces employees to reconsider if they really are committed to Amazon. So, hopefully, if they decline the offer – most do – they are increasing the level of commitment they have for the company.
Now, Amazon could theoretically fire low-performers, but with that comes bad public relations and firing is often an expensive process. This way, if the employee takes the buyout, they leave Amazon with some cash in their pocket and a smile on their face. Overall, it is a win-win for both sides, and just another reason why Amazon remains one of the most successful companies in America.
Of course, it also highlights the importance of hiring the right people. If only there was something that could help a company with that…