Research: When Pay Fluctuates, Workers Walk Away
A study from the Harvard Business Review finds that variable pay structures, such as commissions and gig-work pricing, lead to higher employee turnover. The research suggests that the financial instability caused by fluctuating paychecks negatively impacts worker retention and well-being.
Why it matters
As gig work and performance-based pay become more common, companies must weigh the benefits of flexible labor costs against the long-term expense of losing employees.
According to a recent Payscale report, more than 80% of companies currently use some form of variable pay to compensate their workers. From performance bonuses in sales and commission-based roles to tipped service jobs, demand-based scheduling in retail and construction, and algorithmically-priced gig work, a growing proportion of workers take home paychecks that vary substantially from week to week or month to month. Variable pay is also prevalent among professions often associated with a stable income including public school teachers, police officers, and medical doctors. While companies often use variable pay to manage financial uncertainty and promote performance, research consistently shows that it strains workers financially, physically, and mentally. But does shifting this market risk onto employees ultimately cost employers, too? To explore this question, we conducted a series of studies focused on two different types of variably-paid workers.
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