Financial incentives as a tool to retain employees: Evidence from industries with high employee turnover rates in Vietnam

This study addresses the question of how different financial incentives impact employee satisfaction and retention, particularly in Vietnam’s high-turnover industries, where understanding effective incentive strategies remains underexplored. The study aims to fill this gap by examining which financial incentives—such as bonuses, profit sharing, and stock options—are most effective in improving job satisfaction and reducing turnover. Using a quantitative methodology, survey data from 387 employees in labor-intensive industries such as retail, hospitality, and manufacturing were analyzed to evaluate the relationship between financial incentives and employee retention. The analysis was conducted via partial least squares structural equation modeling (PLS-SEM) with SPSS 22 and AMOS 20 software. The findings indicate that immediate financial incentives, such as performance-based bonuses, company profit sharing, and retention bonuses, significantly enhance job satisfaction and employee retention, whereas stock options have a limited impact in this context. At the same time, the research results also show that, the effect of bonuses on retention is significantly stronger in manufacturing than in both hospitality and retail, there is no significant difference between hospitality and retail. These results are particularly significant, as they align with Vietnam’s economic and cultural characteristics, where employees prioritize short-term financial security over long-term benefits. The implications suggest that companies should design incentive programs tailored to employees’ immediate needs, strategically use retention bonuses to retain key employees during critical periods, and avoid one-size-fits-all approaches by personalizing financial incentives according to employee preferences. At the same time, this reinforces the importance of customizing employee retention strategies based on the specific motivators of each industry and employee expectations, thereby enhancing the overall effectiveness of incentive programs in sectors with high employee turnover rates.