Why Amazon pays their employees $5,000 to quit

As most of our clients know, Amazon (AMZN), a company that has transformed the retail industry, has been among the top ten holdings of our U.S. Equities allocation over the last several years. Their CEO, Jeff Bezos, recently explained in this year’s shareholder letter about a policy they have called “pay to quit”. Once a year, Amazon makes an offer to the employees in each of their fulfillment centers (warehouses) to give them a lump sum if they will quit. The sum starts off at $2,000 in their first year and increases by $1,000 each year, until it caps at $5,000.

You may wonder why a company would ever implement such a strategy. Bezos explained that the reasoning behind this offer is to encourage employees to take a moment and think about what they really want. In the long run, an employee that stays somewhere they don’t want to be isn’t healthy for the company or the employee. Think for a moment about the amount of confidence in your organization you would need to make such an offer. I believe that a company that has the confidence to make such an offer is among the best in the world.

To view the 2013 Letter to Shareholders, follow this link. For a direct link that opens as a .pdf, follow this link.

Jon Houk, CFP®