Research: When Pay Fluctuates, Workers Walk Away

Today, more than 80% of employers offer some form of variable pay. From performance bonuses to tipped service jobs to demand-based gig work, more and more workers are taking home paychecks that differ from week to week or month to month. While companies may tout the benefits of shifting market risk onto their workers in this way, research has shown that it can hurt workers financially, physically, and mentally. Moreover, new research from more than 700 ride-hail and truck drivers indicates that fluctuating paychecks can end up harming employers in the long run due to higher voluntary turnover rates: For the trucking company studied, a one-standard-deviation increase in pay variability was associated with an extra $9.7 million in turnover costs per year. The research outlines the factors underpinning the costly link between pay variability and turnover and offers research-backed strategies to help employers mitigate the negative impact of pay variability on both well-being and retention: 1) Limit market-based pay volatility, 2) help workers feel in control, 3) offer workers transparency into expected pay, and 4) subsidize resources to smooth pay volatility.