Nasir and Matt talk about Amazon's offer to employees to take cash to quit and answer a question on hiring employees to work remotely.
NASIR: Welcome to Legally Sound Smart Business.
This is Nasir Pasha.
MATT: This is Matt Staub.
NASIR: And this is the podcast where we cover business legal news – well, actually, business news and we put in our legal twist. What else do we do? Oh, yeah, we answer legal questions that you submit, the listener, to firstname.lastname@example.org.
MATT: It’s like you wrote that for yourself beforehand because you asked a question and then instantly answered it, but that’s all right.
NASIR: It’s showmanship.
MATT: Things get a little bit crazier on the Friday episodes.
NASIR: That’s true. We’ve got to take it down a notch and get a little relaxed, right? Get ready for the weekend.
MATT: We’ve got a good episode here and I like this story that we have.
NASIR: Wait, wait, wait, wait. How do you know it’s a good episode already?
MATT: Well, I think it’s going to be a good episode.
NASIR: Well, let’s wait until the end and then we’ll comment on it.
Well, I know it’s going to be good – well, I’m pretty sure – because the story we’re going to talk about, the first thing you see is it looks like a picture from your place because it’s a cat and an Amazon box which anyone who listens to the podcast knows that you love ordering things from Amazon and you love cats.
NASIR: That’s true. Well, I don’t know if I love cats. I really love my cat but it’s my cat.
MATT: Let me get in the actual details here. This is something that Amazon, I think, they’re going to do. They haven’t done it yet but they’re going to offer their warehouse employees money.
NASIR: They’ve been doing this for a while, I think.
MATT: Oh, they have been doing it for a while.
NASIR: I think so because I read somewhere… Go ahead, sorry, I didn’t mean to interrupt. I’ll be quiet.
MATT: Anyway, they’re offering warehouse employees a cash incentive in order to quit. They call it the “pay to quit” program but it’s funny. They don’t want them to quit. They basically want people that are invested in Amazon in the long-term so that, even when they get this offer, it even says, “Please don’t take this offer.” It starts at $2,000 the first time and it increases by $1,000 each year until you hit $5,000.
I really like this idea. It’s a really interesting concept. I mean, you know some people are going to take this and they’re going to take their $2,000 and run.
NASIR: In fact, I looked this up on another website but it says fewer than ten percent of the employees who got the offer took it and left the company. That’s still ten percent. That’s still a portion of your business there.
MATT: Yeah, and I imagine they probably have a lot of people that work for them. There’s a lot of Amazon packages going out and this is just warehouse employees so I’m sure there’s a lot of people. I mean, I know in Indianapolis, this past holiday season, they made a huge seasonal push and hired a ton of people. So, it’s probably for more long-term.
NASIR: Yeah. In fact, I’m looking here, it looks like they’ve been doing this for a while but only for a portion of their employees. But, recently, in January, they rolled it out to 40,000 warehouse employees in January.
What do you think about the concept? It’s pretty novel but, when you have that organization, you’re looking for long-term employees and people that are really bought into your industry. It seems like a pretty positive thing and something that has a lot of potential.
MATT: You said 40,000 people were offered?
NASIR: I think there were more people than that but the new people that were offered is 40,000 warehouse employees back in January.
MATT: If we assume ten percent, that’s still $8 million which, to Amazon, that’s pretty much nothing. They probably do that in five seconds. But $8 million is $8 million.
NASIR: Wait, how did you get to $8 million? That’s a lot of money, I think, no?
MATT: Well, 40,000 people.
NASIR: It’s 40,000 people were offered and ten percent of them.
MATT: Yeah, so that’s 4,000 people.
NASIR: 4,000 times…
NASIR: Well, it goes from 2,000 to…
MATT: 4,000 people times $2,000.
NASIR: What the heck? Oh, you’re right. That’s at least $8 million. That’s true! That’s a lot of money!
MATT: Yeah. Like I said, it’s Amazon, I’m sure they make a ton of money, but it’s still a good chunk.
NASIR: I guess that makes sense, yeah.
MATT: Even though they’re taking this hit, I still like the idea because there’s costs involved in hiring new people. The more they can keep those employees that want to be there, the more they can retain those and keep more people as possible, the less cost there’s going to be with that because there’s training and things of that nature. So, I like the idea in general.
I’m wondering how they’re working in the warehouse. I wonder what’s preventing someone from just taking the money and then leaving and then getting a similar job somewhere else. It’s basically just free money. I mean, obviously, they’d have to get a new job, but maybe that’s some of the people that were doing that.
NASIR: I would assume that the people that left were going to leave anyway, right?
NASIR: Maybe $2,000 or so and that’s a big chunk of their money, and depending on how much they’re getting paid, maybe it’s a couple of pay periods for them, right? Or less, probably.
One thing that’s cool is that, if you think about it, unhappy employees, whether they’re making their way out or whatever, it’s troublesome to the business besides what you’re saying of hiring new employees. I mean, they’re going to be less productive. They may cause other problems, too, right? I mean, Amazon has already come across a couple of labor dispute lawsuits.
If an employee is happy with the company, I don’t care if they’re not paying overtime correctly or giving you lunchbreaks and so forth. Those employees are not going to complain because they’re happy with their job. Only employees that are being mistreated, that feel like they’re not being valued the way they are are the ones that are going to cause trouble for you. And so, there might as well be a settlement to buy your way out of these kinds of legal issues.
MATT: It is interesting, too, how it ramps up by $1,000 each year. I just can’t think of the situation where someone works there, their third year, they go from $4,000 to $5,000. I mean, you’ve worked there a couple of years. $4,000 wasn’t enough but, once you hit that $5,000-buyout, after working there for years, that’s when you make the decision? I guess if you’re really in a crunch, you might.
MATT: But might as well just be this initial offer because a little under ten percent for the first offer, it has to be one percent or maybe a little bit higher for the later years.
NASIR: I think one thing that’s clear is Amazon recognizes that they need efficient quality workers. You know, they even say that they pay about 30 percent more than a typical retail worker in the industry. That’s pretty significant. Like you said, they’re increasing their full-time employees from last year and they’re just basically trimming the fat.
In fact, I read that they got this idea from Zappos which is a company that I think sold footwear or something. Amazon actually purchased them even though Zappos was a separate unit, apparently, and operating independently.
MATT: Zappos is known for having great culture. It’s not really surprising that Amazon would want to copy that because, you know, like, the companies that are doing it right.
NASIR: Yeah, but I just can’t get over that they’re willing to pay at least $8 million because they know they’re probably going to save more money than that in the long-term and it’s worth it for them. It’s a pretty interesting concept.
MATT: I’m curious what their annual revenue is.
NASIR: Oh, yeah, $8 million is probably nothing compared to it. It’s just an interesting concept because you would think that, in one day, an $8 million loss is a lot for any company – a loss that’s not necessary.
MATT: To answer this, this looks like it’s from even a couple of years ago, the first quarter Amazon posted sales each day of $54.3 million each day.
NASIR: Think about it. If it’s $54 million each day, $8 million out of that in one day is a significant amount but, of course, you don’t look at it like that because the cost is spread out.
MATT: Yeah, and we’ve done so much math this week. I hope there’s no math towards the end here.
NASIR: Let’s get to our question of the day.
MATT: All right.
“I’ve been looking to hire a new employee but have tapped my local market. What should I look for when trying to hire someone remotely?”
This comes from Gotham, New York, which I don’t even think is even real. It might be Batman.
NASIR: So, are we still getting over the Gotham issue? I kind of missed the question.
This guy, they’re looking to hire new employees but have tapped out the local market. What should I look for when trying to hire someone remotely?
MATT: I think they’re just asking for advice on how to find someone. I’m a very face-to-face person. I would much rather meet someone face-to-face and over the phone or even obviously email, too. But this is for people, you’re trying to hire an employee – which we just talked about is very important that you hire the right people. So, what are some good practices for trying to find the right person if you’re just going to conduct some sort of phone call? I would think you would at least try to talk with them and not just do it all over email. That’s step number one, I guess.
First things first; maybe try to set up some sort of Google Hangout or Skype so you can do a video interview. I see people doing those all the time at my office. That’s idea number one right there.
NASIR: Yeah, I actually have experience with this. I mean, I’ve hired a number of people remotely – even our clients, in that respect, that we’ve never met in person but, like you mentioned, video chat and phone is very essential but I don’t know if I have great advice from a positive perspective but I know what not to do.
I know that it’s really important to set very clear expectations. Being able to have your system – how you run your business – able to work with remote employees and independent contractors. Some businesses are just not geared that way and it can cause a lot of problems. If you’re not used to working remotely and you don’t understand how that works, then you’re not going to be able to appreciate managing an employee or even finding a new hire in that way as well.
But it’s not uncommon if you’re looking for a specific skill set and not find it in your local area. This is frankly why businesses open up in other areas – just because they’re looking for a separate workforce. But remember that there are a lot of downsides to hiring people remotely as well.
From a legal perspective, just to give that angle to it, I don’t see it much different than anything else. The big thing though I think is creating the right expectations.
MATT: I will say, from a legal perspective, I think it can be beneficial in the sense that I would think you’re much less likely to be sued for any sort of discriminatory practices – at least in the hiring process – because how are they going to assert discrimination if you just talked to them on the phone? Depending on what they assert it for, you know.
NASIR: It depends what question you ask, too. If you ask, “Oh, what color is your skin? What’s your sexual preference?”
MATT: “Describe to me what you look like.” Well, I assume that they’re not doing that. Obviously, if that’s the case, it’s completely different.
NASIR: That’s true. Well, I was also thinking too, if you want to hire independent contractors, then having them work remotely is perfect because it’s very unlikely that you’re going to have the classification issues because I think there’s only certain circumstances when you really have a lot of control over those employees where they’re working remotely that they’ll be considered employees. You really have to exert yourself quite a bit of control over those types of personnel to be considered an employee.
MATT: I don’t know what your stance is on this but I’ve talked to people before – and this is something you can do for these interviews – is some people like to give some sort of personality test and I’m blanking on the name of the one that people always tell me but it’s something you can do before or after talking to them, if you really wanted to do that. Some people I’ve spoken to just swear by it and say that’s the best approach to take.
NASIR: In fact, it’s something that I’ve been discussing with some consultants this week. You’re right. They have these personality tests and then other people say, “Well, we don’t use personality tests. We use a totally different concept and approach to it.” Personally, I’m skeptical, but I think that’s my ego saying that I can tell or that I know people or whatever. I’m sure there’s some more objective ways, but it depends. I mean, how many people are you going to be interviewing and what’s your turnover like? So, I’m skeptical about the personality test aspect. Have you taken one? I’ve never taken one.
MATT: I’m trying to think. I’m pretty sure we took some in undergrad in business school, but I don’t think I’ve ever taken an actual one for an interview before – not that I can remember.
NASIR: Also, people suggest to do a one-way interview. Have you heard of that? Basically, you send them the questions to the candidates and then they pre-record their answers and they send it to you. Obviously, you tell them they have this amount of time to send it in and so forth. It’s kind of interesting.
MATT: I’m probably not as big a fan of that because I get that they have one minute to answer but you can re-record but it’s still just kind of weird.
NASIR: It seems pretentious to me, a little bit. It’s like, “Oh, I don’t have time to talk to you or interview you. Just answer these questions and I’ll watch it when I get a chance.”
MATT: Interviewing in general is just a pretty weird area. So much time gets spent thinking about all these different possibilities and all these different scenarios and then 90 percent of the time, nothing – a lot of people I’ve spoken to – and these are just numbers I’m making up but – 89 percent of the time, they’re like, “Oh, yeah, it was easier than I thought it was going to be.”
NASIR: Yeah, people get nervous.
Frankly, I think interviewers get just as nervous interviewing.
MATT: I’ve had to interview people before. I kind of liked it. But, yeah, it is a little bit weird, I will say that.
NASIR: So, our advice to Batman, what should I look for when trying to hire somebody remotely? I think, gosh, it’s just hard to summarize that. I don’t know if we’re the right people to answer that.
MATT: From the legal – you know, we put the legal twist on it – I think we did as best as we could in terms of offering the legal. This is more of a non-legal question but we gave the most legal answer we could.
NASIR: Okay. All right. We did our best so I think that’s our episode – Episode 33.
We have a pretty good week this week, right?
MATT: Yeah, 33 – really getting up there in the numbers.
NASIR: What do you think? Was that a good episode like you predicted?
MATT: Oh, yeah, I forgot. I predicted before the episode, it was going to be good, and the verdict is, yes, it was good.
NASIR: Awesome. I’m excited now! I’m looking forward to listening to it.
Okay, that’s our episode.
Have a good one!
MATT: Yeah, keep it sound and keep it smart!