Non-Wage Benefits and Employee Sorting

Abstract

This study examines whether non-wage benefits can facilitate the sorting of employees into different remuneration arrangements within firms. Using data from the largest employer review platform in Germany, we derive four main insights. First, we document that the number and types of benefits employees receive exhibit substantial within-firm variation. Second, we find that women receive more benefits compared to men and that this difference is concentrated in benefits that can be considered family-friendly. Third, analyses that exploit information on employee satisfaction and cross-sectional variation in firm characteristics suggest that the observed gender differences in received benefits are due to differential preferences. Finally, we examine whether, consistent with preference-based sorting, firms offering more variation in benefit arrangements are associated with positive employment outcomes. We find that greater within-firm variability in benefits is associated with higher employee satisfaction and retention. Taken together, our findings provide corroborating evidence for the sorting role of benefits in the design of employee remuneration packages.

Daniel Schaupp

Assistant Professor of Strategy and Managerial Accounting

My research interests include performance evaluation, feedback, incentives and the impact of new digital technologies on management control.