Why One Company Pays $25,000 to Quit

Unhappy employees cost a company money. So why not get rid of them?

What’s more, why not pay them to leave?

That’s the view taken by Riot Games Inc., the Santa Monica, California-based videogame maker of popular titles like “League of Legends.” The company announced on June 19 it will begin paying employees up to $25,000 to quit if they’re unhappy within their first 60 days on the job.

The announcement comes after similar moves by Internet retailers Zappos.com and Amazon.com Inc., which pay employees $2,000 and $5,000, respectively, if they opt to quit. 

Marc Merrill, Riot Games’ president and co-founder, said the program is a pre-emptive measure taken to reinforce the company’s desired culture, which is to have dedicated employees who are entirely aligned with its vision and mission.

Merrill said the decision to pay employees to leave is multifaceted. First — and perhaps most obvious — Riot doesn’t want employees who don’t want to be there. And providing employees the opportunity to receive an initial windfall — and a sizable one at that — is a great way to test those who are truly in it for the long run.

In terms of how the company came up with its pay figure, Merrill said: “We set the cap at $25,000, which is 10 percent of the annual salary, so that the program would appeal to hires across a wide range of experience levels. We specifically set this level to make the ‘How will I support myself’ question easier to answer, especially given the high cost of living in Southern California.”

According to the most recent employee engagement figures from research firm Gallup, 70 percent of the U.S. workforce is disengaged at work, with such apathy costing the nation roughly $450 billion to $550 billion annually in lost productivity.

Many companies combat the problem by rewarding productive behavior. Experts say the practice is rooted in behaviorist theory, which asserts that people will perform better if prompted with an incentive. In the workplace, this includes everything from “Employee of the Month” programs to vacation time and stock options.

But often such perks aren’t enough. Uri Gneezy, a professor of behavioral economics at the University of California at San Diego’s Rady School of Management, said identifying potentially disengaged employees should ideally happen during the initial hiring period.

“If you ask potential employees, ‘Are you enthusiastic to work for me?’ they will say, ‘Yes, sure,’” Gneezy said. “That is where you are supposed to lie. There is no way to actually get people to tell the truth by simply asking them. You want to have something that is incentive compatible for them to say that they really want to stay with you.”

Gneezy said Riot Games’ pay-to-quit strategy — as well as those instituted at other companies — is a smart move. “The value of your worker depends on how much they want to work for you,” he said. “If I’m willing to give up $25,000 then that means that I really want to stay with you.”

Moreover, Gneezy said programs like this are the best way to weed out potentially disengaged workers in an industry reliant on creativity instead of measurable output.

“If you work in a factory, I can know the quantity and quality of what you are doing,” Gneezy said. “When you’re working in some kind of creative solution, it’s much harder to known how much effort you put in and to measure the quality of what you did.”

Merrill said Riot can also glean deeper information from the exercise, including ways the company can improve its recruitment and interviewing strategies. 

“If someone takes advantage of the program, we want to understand why,” he said. “We’ll talk with the person and research the entire hiring process. With that story, we will go back to leaders and hiring managers at Riot and see what we could have done differently or what we can do next time to make sure we’re hiring well.”

Sarah Sipek is an associate editor at Talent Management. She can be reached at ssipek@talentmgt.com.