Keywords:
employee retention
financial incentives
job satisfaction
Vietnam

  • Abstract

    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.

  • References

    1. Adams, J. S. (1963). Toward an understanding of inequity. Journal of Abnormal and Social Psychology, 67 (5), 422–436. https://doi.org/10.1037/h0040968
    2. Aldatmaz, S., Ouimet, P., & Wesep, E. (2018). The option to quit: The effect of employee stock options on turnover. Journal of Financial Economics, 127 (1), 136-151. https://doi.org/10.1016/j.jfineco.2017.10.007
    3. Allen, N. J., & Meyer, J. P. (1990). The measurement and antecedents of affective, continuance and normative commitment to the organization. Journal of Occupational Psychology, 63 (1), 1–18. https://doi.org/10.1111/j.2044-8325.1990.tb00506.x
    4. Aman-Ullah, A., Ibrahim, H., Aziz, A., & Mehmood, W. (2022). Impact of workplace safety on employee retention using sequential mediation: Evidence from the health-care sector. Rausp Management Journal, 57 (2), 182-198.
    5. Anderson, J. C., & Gerbing, D. W. (1988). Structural equation modeling in practice: A review and recommended two-step approach. Psychological Bulletin, 103 (3), 411-423.
    6. Arbuckle, J. L. (2011). IBM SPSS Amos 20 user's guide . Amos Development Corporation. United States: SPSS Inc.
    7. Arifin, S. (2024). The role of job satisfaction in mediating employee engagement on employee performance. International Journal of Research in Social Science and Humanities, 5 (4), 01-07. https://doi.org/10.47505/ijrss.2024.4.1
    8. Armstrong‐Stassen, M., & Schlosser, F. (2008). Benefits of a supportive development climate for older workers. Journal of Managerial Psychology, 23 (4), 419-437.
    9. Artiono, R., & Hidayat, D. (2021). Binomial approach for the valuation of employee stock option with some features: Vesting period, exit rate, reload, and reset. E3S Web of Conferences, 328 , 06006. https://doi.org/10.1051/e3sconf/202132806006
    10. Aulia, A., Aina, A., & Wafa, Z. (2022). Emotional labor and perceived organizational support as a predictor of restaurant employee satisfaction. Journal of Educational Health and Community Psychology, 11 (1), 1. https://doi.org/10.12928/jehcp.v11i1.21031
    11. Awang, Z. (2012). Research methodology and data analysis (2nd ed.). UiTM Press.
    12. Baquero, A. (2022). Customer and employee satisfaction in hotels. Journal of Hospitality and Tourism Issues, 4 (2), 69-83. https://doi.org/10.51525/johti.1172181
    13. Blasi, J. R., Freeman, R. B., & Kruse, D. L. (2013). The citizen’s share: Putting ownership back into democracy . Yale University Press.
    14. Blasi, J. R., Kruse, D., & Bernstein, A. (2003). In the company of owners: The truth about stock options (and why every employee should have them) . Basic Books.
    15. Blasi, J., Kruse, D., & Freeman, R. B. (2018). Broad-based employee stock ownership and profit sharing: History, evidence, and policy implications. Journal of Participation and Employee Ownership, 1 (1), 38-60. https://doi.org/10.1108/jpeo-02-2018-0001
    16. Blau, G. (1993). Further exploring the relationship between job search and voluntary individual turnover. Academy of Management Journal, 36 (2), 269–298.
    17. Blau, P. M. (1964). Exchange and power in social life . Wiley.
    18. Brayfield, A. H., & Rothe, H. F. (1951). An index of job satisfaction. Journal of Applied Psychology, 35 (5), 307.
    19. Brown, M., Sturman, M. C., & Simmering, M. J. (2010). Compensation policy and employee turnover. Journal of Business and Psychology, 25 (1), 87–103.
    20. Bryant, P. C., & Allen, D. G. (2013). Compensation, benefits, employee turnover: HR strategies for retaining top talent. Compensation & Benefits Review, 45 (3), 171-175. https://doi.org/10.1177/0886368713494342
    21. Cappelli, P., Conyon, M., & Almeda, D. (2019). Social exchange and the effects of employee stock options. ILR Review, 73 (1), 124-152. https://doi.org/10.1177/0019793919827934
    22. Cascio, W. F., & Boudreau, J. W. (2011). Investing in people: Financial impact of human resource initiatives . FT Press.
    23. Chawla, D., & Sondhi, N. (2016). Research methodology; Concepts and cases (2nd ed.).
    24. Core, J. E., & Guay, W. R. (2001). Stock option plans for non-executive employees. Journal of Financial Economics, 61 (2), 253–287.
    25. Cowherd, D. M., & Levine, D. I. (1992). Product quality and pay equity between lower-level employees and top management. Administrative Science Quarterly, 37 (2), 302–320.
    26. Cronbach, L. J. (1951). Coefficient alpha and the internal structure of tests. Psychometrika, 16 (3), 297-334.
    27. Daneshfar, A., Simyar, F., Rolleri, M., & Wnek, R. (2010). Motives for employee profit sharing schemes in the U.S., U.K. and Canada. International Business & Economics Research Journal (IBER), 9 (10). https://doi.org/10.19030/iber.v9i10.634
    28. Dhamija, P., Gupta, S., & Bag, S. (2019). Measuring of job satisfaction: The use of quality of work life factors. Benchmarking: An International Journal, 26 (3), 871-892.
    29. Dulebohn, J. H., & Werling, S. E. (2007). Compensation research: Broadening pay research horizons. Human Resource Management Review, 17 (2), 127–144.
    30. Eisenberger, R., Huntington, R., Hutchison, S., & Sowa, D. (2001). Perceived organizational support. Journal of Applied Psychology, 71 (3), 500–507. https://doi.org/10.1037/0021-9010.71.3.500
    31. Faizati, L. (2023). Penerapan insentif pada toko retail. Jurnal Ekonomi Bisnis dan Manajemen, 3 (1), 275-280. https://doi.org/10.58192/ebismen.v3i1.1788
    32. Fibírová, J., & Petera, P. (2013). Profit-sharing – a tool for improving productivity, profitability and competitiveness of firms? Journal of Competitiveness, 5 (4), 3-25. https://doi.org/10.7441/joc.2013.04.01
    33. Fishbein, M., & Ajzen, I. (1975). Belief, attitude, intention, and behavior: An introduction to theory and research . Addison-Wesley.
    34. Forza, C., & Filippini, R. (1998). TQM impact on quality conformance and customer satisfaction: A causal model. International Journal of Production Economics, 55 (1), 1-20.
    35. Gerbing, D. W., & Anderson, J. C. (1988). An updated paradigm for scale development incorporating unidimensionality and its assessment. Journal of Marketing Research, 25 (2), 186-192. https://doi.org/10.1177/002224378802500207
    36. Gerhart, B., & Fang, M. (2014). Pay and job satisfaction: A meta-analytic review. Journal of Applied Psychology, 99 (2), 193–208. https://doi.org/10.1037/a0035414
    37. Hackman, J. R., & Oldham, G. R. (1975). Development of the job diagnostic survey. Journal of Applied Psychology, 60 (2), 159.
    38. Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (1998). Multivariate data analysis (5th ed.). Prentice-Hall, New Jersey.
    39. Hanai, A., & Pallangyo, W. (2020). The contribution of compensation in the employee retention of the banking institutions in Dar es Salaam, Tanzania. European Journal of Business Management and Research, 5 (4).
    40. Herzberg, F., Mausner, B., & Snyderman, B. B. (1959). The motivation to work (2nd ed.). John Wiley & Sons.
    41. Hofstede, G. (1980). Culture's consequences: International differences in work-related values . Sage Publications.
    42. Hom, P. W., Lee, T. W., Shaw, J. D., & Hausknecht, J. P. (2017). One hundred years of employee turnover theory and research. Journal of Applied Psychology, 102 (3), 530-545. https://doi.org/10.1037/apl0000103
    43. Hur, Y., & Adler, H. (2011). Employees' perceptions of restaurant brand image. Journal of Foodservice Business Research, 14 (4), 334-359.
    44. International Labour Organization (ILO). (2021). Decent work and sustainable development in Vietnam's hospitality sector . Recuperado de https://www.ilo.org
    45. Kamloonwesaruch, C., Kaewkuntee, B., Pahasing, B., & Lekapojpanich, S. (2022). Antecedents of employee retention in the Thai information technology industry. International Journal of Health Sciences , 36-48.
    46. Kettinger, W. J., Lee, C. C., & Lee, S. (1995). Global measures of information service quality: A cross‐national study. Decision Sciences, 26 (5), 569-588.
    47. Khan, S. (2014). The factors affecting employee turnover in an organization: The case of overseas Pakistanis foundation. African Journal of Business Management, 8 (1), 25-34. https://doi.org/10.5897/ajbm2013.2508
    48. Kiran, Y. (2024). Impact of HRM practices on employee retention: Moderating role of job satisfaction. Journal of Social & Organizational Matters, 3 (1), 72-92.
    49. Kline, R. B. (2023). Principles and practice of structural equation modeling (5th ed.). Guilford Press.
    50. Koys, D. J. (2001). The effects of employee satisfaction, organizational citizenship behavior, and turnover on organizational effectiveness: A unit‐level, longitudinal study. Personnel Psychology, 54 (1), 101-114.
    51. Kruse, D. (1993). Profit sharing: Does it make a difference?: The productivity and stability effects of employee profit-sharing plans.
    52. Kwon, K., & Hein, P. (2013). Employee benefits and job satisfaction: A study of manufacturing workers. International Journal of Human Resource Management, 24 (12), 2405–2417. https://doi.org/10.1080/09585192.2013.781524
    53. Lee, C., Lee, C., Jiang, L., Lin, C., Huang, F., & Yu, C. (2017). The impact of salary structure, performance requirements, and type of business on the performance of housing brokerage employees. Asian Economic and Financial Review, 7 (7), 685-699. https://doi.org/10.18488/journal.aefr.2017.77.685.699
    54. Mahmood, A. (2020). Employee stock option plans: A meta-analysis (understanding impact of ESOPs through literature). Studies in Business and Economics, 15 (1), 100-114. https://doi.org/10.2478/sbe-2020-0009
    55. Milkovich, G. T., & Newman, J. M. (2008). Compensation (10th ed.). McGraw-Hill.
    56. Mitchell, O. S., & Utkus, S. P. (Eds.). (2004). Pension design and structure: New lessons from behavioral finance . Oxford University Press.
    57. Mitchell, T. R., Holtom, B. C., Lee, T. W., Sablynski, C. J., & Erez, M. (2001). Why people stay: Using job embeddedness to predict voluntary turnover. Academy of Management Journal, 44 (6), 1102–1121. https://doi.org/10.5465/3069391
    58. Ng, E. S., Yam, K. C., & Aguinis, H. (2017). Employee satisfaction in developing economies: The role of monetary compensation. Asia Pacific Journal of Management, 34 (2), 123–145. https://doi.org/10.1007/s10490-016-9490-7
    59. Nguyen, H. T., & Truong, Q. (2021). Labor turnover in Vietnam's manufacturing sector: Causes and consequences. Asian Journal of Business Research, 11 (2), 45-58.
    60. Nguyen, L., Pham, T. A., & Le, T. (2019). Challenges in employee retention in Vietnam's retail sector: A case study. Management Review Quarterly, 69 (4), 437-452.
    61. Nyoni, N. (2024). Employee retention strategies and job satisfaction in local government authorities in Tanzania: A case of Tabora Municipal Council. South Asian Journal of Social Studies and Economics, 21 (7), 55-69. https://doi.org/10.9734/sajsse/2024/v21i7844
    62. Ogbonnaya, C., Daniels, K., & Nielsen, K. (2017). Does contingent pay encourage positive employee attitudes and intensify work? Human Resource Management Journal, 27 (1), 94-112. https://doi.org/10.1111/1748-8583.12130
    63. Oyer, P., & Schaefer, S. (2005). Why do some firms give stock options to all employees? An empirical examination of alternative theories. Journal of Financial Economics, 76 (1), 99–133.
    64. Qin, Z. (2022). Whether the adjustment of compensation incentives within a company has an impact on the non-employee directors of the company and brings profit or not. BCP Business & Management, 28 , 52-57. https://doi.org/10.54691/bcpbm.v28i.2215
    65. Rosin, H. M., & Korabik, K. (1995). Organizational experiences and propensity to leave: A multivariate investigation of men and women managers. Journal of Vocational Behavior, 46 (1), 1–16.
    66. Rubel, M., Kee, D., & Rimi, N. (2023). Quality of work life and employee work outcomes: A hierarchical model with mediation analysis. International Journal of Business and Society, 24 (1), 421-439. https://doi.org/10.33736/ijbs.5625.2023
    67. Sesil, J., & Lin, Y. (2011). The impact of employee stock option adoption and incidence on productivity: Evidence from U.S. panel data. Industrial Relations: A Journal of Economy and Society, 50 (3), 514-534. https://doi.org/10.1111/j.1468-232x.2011.00648.x
    68. Shaw, J. D., & Gupta, N. (2015). Let the evidence speak again: Financial incentives are more effective than we thought. Human Resource Management Journal, 25 (3), 281–293. https://doi.org/10.1111/1748-8583.12080
    69. Shoaib, S., Nasir, A., & Raza, S. (2023). Impact of organizational culture and compensation on job satisfaction and employee retention: A case of pharmaceutical industry of Pakistan. GMJACS, 13 (1), 78-94. https://doi.org/10.59263/gmjacs.13.01.2023.288
    70. Sorn, M. (2024). Navigating employee retention: The importance of compensation in Phnom Penh's private companies, Cambodia. Am. J. Appl. Stat. Econ., 3 (1), 109-118. https://doi.org/10.54536/ajase.v3i1.2893
    71. Steiger, J. H. (1990). Structural model evaluation and modification: An interval estimation approach. Multivariate Behavioral Research, 25 (2), 173-180.
    72. Subiyanto, E., & Kurniawan, R. (2022). Designing fair annual bonus formulations for workers: A case study of the state-owned enterprise cement holding in Indonesia. Humanities and Social Sciences Communications, 9 (1). https://doi.org/10.1057/s41599-022-01471-3
    73. Tirta, A., & Enrika, A. (2020). Understanding the impact of reward and recognition, work-life balance, on employee retention with job satisfaction as mediating variable on millennials in Indonesia. Journal of Business & Retail Management Research, 14 (03). https://doi.org/10.24052/jbrmr/v14is03/art-09
    74. Tsebro, P. (2016). Employee stock options: Financing constraints explanation. Journal of Finance Issues, 15 (2), 1-13. https://doi.org/10.58886/jfi.v15i2.2487
    75. VietnamWorks. (2022). Vietnam employment report: Turnover trends in 2022 . Retrieved from https://www.vietnamworks.com
    76. Vroom, V. H. (1964). Work and motivation . Wiley.
    77. Warr, P., Cook, J., & Wall, T. (1979). Scales for the measurement of some work attitudes and aspects of psychological well-being. Journal of Occupational Psychology, 52 (2), 129-148.
    78. Weitzman, M. L., & Kruse, D. (1990). Profit sharing and productivity. Brookings Papers on Economic Activity. Microeconomics, 1990 , 95–142.
    79. Williams, M. L., & Dreher, G. F. (1992). Compensation system attributes and applicant pool characteristics: Predicting the attraction of compensation system offerings. Personnel Psychology, 45 (4), 739–763. https://doi.org/10.1111/j.1744-6570.1992.tb00866.x
    80. Zahirah, R. (2024). Application of simple additive weighting (SAW) method in determining employee bonus (case study: PT. Wana Anugrah Albasindo). Jurnal JTik (Jurnal Teknologi Informasi dan Komunikasi), 8 (1), 228-237. https://doi.org/10.35870/jtik.v8i1.1450
    81. Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2000). Business research methods (Vol. 6). Dryden Press.
Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Copyright (c) 2025 The Authors

How to cite

Doan, T. Y., Nguyen, T. T. N., Le , T. H. H., Hoang, D. H., Nguyen , T. T., & Pham , H. H. (2025). Financial incentives as a tool to retain employees: Evidence from industries with high employee turnover rates in Vietnam. Multidisciplinary Reviews, 8(10), 2025333. https://doi.org/10.31893/multirev.2025333
Crossref
Scopus
Google Scholar
Europe PMC
  • Article viewed - 196
  • PDF downloaded - 85