Worker Runs

72 Pages Posted: 18 Jul 2022 Last revised: 18 Jul 2023

See all articles by Florian Hoffmann

Florian Hoffmann

KU Leuven

Vladimir Vladimirov

University of Amsterdam Business School; Centre for Economic Policy Research (CEPR)

Date Written: July 18, 2023


The voluntary departure of hard-to-replace skilled workers worsens firm prospects, which can prompt additional departures. We develop a model in which firms design compensation to limit the risk of such "worker runs." To achieve cost-efficient retention, firms use fixed wages and dilutable compensation --- such as vesting equity or bonus pools --- that pays remaining workers more when others leave but gets diluted otherwise. The optimal degree of dilution and its implementation depend on the firm's production technology, relative risk exposure, and financial constraints. Compensating workers with differently-structured compensation can further mitigate worker runs by ensuring a critical retention level.

Keywords: Compensation structure of non-executive employees, high-skilled employees, contagious turnover, worker runs, dilutable compensation, asymmetric compensation, time- and performance-vesting, retention bonuses.

JEL Classification: G32, M52, J54, J33

Suggested Citation

Hoffmann, Florian and Vladimirov, Vladimir, Worker Runs (July 18, 2023). Available at SSRN: or

Florian Hoffmann

KU Leuven ( email )

Naamsestraat 69
Box 3525
Leuven, 3000


Vladimir Vladimirov (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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