Retention incentives and mental health
Project studied the effectiveness of financial incentives for worker retention in a large ready made garment factory in Ethiopia.
Abstract
The project studied the effectiveness of financial incentives for worker retention in a large ready made garment factory in the Hawassa Industrial Park, Ethiopia. It collaborated with a large company that faced very high levels of turnover among new staff. It reports the results of a Randomised Control Testing (RCT). It tested whether a generous eight month retention bonus outperforms a smaller short term retention bonus in inducing long-term retention. It found that the more generous, longer term bonus did not induce additional retention. However, it showed that this bonus increases retention for two pre-specified groups: workers who are particularly patient and those with better mental health at baseline. The results suggest that financial incentives for retention (i) can have unexpected consequences on the composition of the workforce of a firm and (ii) need to be complemented by other retention policies more appealing to impatient and stressed workers to impact overall retention rates. Designing a mechanism whereby different workers can select into different types of retention policies is a fruitful avenue for future research.
This is an output of the Gender, Growth and Labour Markets in Low Income Countries programme.
Citation
Abebe G, Caria S and Hensel L. ‘Retention Incentives and Mental Health’ Policy Brief Number 67, Gender, Growth and Labour Markets in Low Income Countries 2024