The bonus that makes employees more committed

The bonus that makes employees more committed Gaby Clark Scientific Editor Andrew Zinin Chief Editor Offer your employees money to quit and the ones who say no will work harder as a result. Researchers at the University of Waterloo, Wilfrid Laurier University and McMaster University set out to test whether pay-to-quit programs work as intended. Their results confirmed they do and revealed a benefit that nobody anticipated. The study is among the first to empirically examine pay-to-quit incentives, cash bonuses offered to employees who choose to voluntarily resign. Across two experiments, the research team found that choosing to stay when offered a financial incentive to leave translates into stronger performance, and that these programs also effectively filter out less committed employees. "It is such a counterintuitive practice," says Dr. Kelsey Matthews, a professor at UWaterloo's School of Accounting and Finance (SAF). "Most of what we hear about incentives is how to get people to stay, work harder or perform better, so the idea of offering money for someone to leave immediately raised a really interesting question: Under what circumstances could that genuinely be a smart organizational strategy?" Matthews and her co-authors, Dr. Leslie Berger and Dr. Lan Guo of Laurier and Dr. Bradley Ruffle of McMaster, ran two experiments. The first used a controlled lab setting with more than 300 undergraduate participants assigned to work for either their own university or a rival institution. The second recruited actual employees through an online labor market platform and asked them to respond to a scenario in which their company had introduced a pay-to-quit program. The surprise came from the employees who turned the offer down. Rather than feeling resentful that disengaged colleagues were being paid to leave while they received nothing for staying, employees who declined the incentive increased their work effort in the period that followed. "Going in, we thought it could go either way," Matthews says. "What we found was much more encouraging. When employees actively choose the organization over the cash, that choice can sharpen their sense of belonging and translate into stronger motivation going forward." The researchers think they know why. When employees are asked to consider how much they value their workplace and then actively choose to stay, that decision puts their connection to the organization front of mind. The act of choosing, of saying no to the money, makes employees more aware of what they value about their job, and that awareness carries over into how they work. The programs also work as a sorting mechanism. Employees who felt little connection to their organization, its values, goals and mission, were the most likely to take the money and go. Those who felt strongly connected were unlikely to leave no matter what was on the table. The most practically significant sorting finding involved the employees in between. Those with moderate levels of connection to their organization were the most responsive to whether a pay-to-quit incentive was offered. Compared with peers who felt either little or strong connection, moderately connected employees were significantly more likely to leave when the incentive was on the table. That group represents at least 35% of the typical workforce, the researchers note, making it the cohort where a pay-to-quit program has the most leverage. The researchers note that decisions to accept or decline a pay-to-quit offer will also be shaped by factors outside the scope of the study, including an employee's financial circumstances and the availability of comparable work elsewhere. The findings carry particular relevance for organizations grappling with employees who have mentally checked out but not resigned. A pay-to-quit incentive can help identify and encourage the departure of those employees while reinvigorating the ones who choose to stay. The researchers do flag one important caveat. Because the incentive has its strongest sorting effect on moderately connected employees, organizations risk losing those who are not fully disengaged but not yet fully committed, some of whom might have developed stronger ties over time. Companies considering a pay-to-quit program should weigh that trade-off carefully. The research grew out of Matthews' doctoral work at Laurier, where Berger and Guo served as her supervisors, and was inspired in part by programs at companies including Zappos and Trainual. What began as a question about a distinctive management practice evolved over eight years into empirical evidence for its effectiveness. "Paying Employees to Quit: An Experimental Study of Sorting and Motivational Effects" is published in the Journal of Management Accounting Research. More information Leslie Berger et al., Paying Employees to Quit: An Experimental Study of Sorting and Motivational Effects, Journal of Management Accounting Research (2026). DOI: 10.2308/jmar-2024-053 Provided by University of Waterloo