The effect of compensation and HR practices on employee attachment

The first chapter examines the effect of tuition reimbursement - a type of employer-provided general training program commonly offered by firms - on employee turnover. Standard human capital theory argues that investment in firm-specific skills reduces turnover, while investment in general skills training could result in increased turnover. However, firms cite increased retention as a motivation for offering this program. This rationale for offering these programs challenges the predictions of the standard human capital model. The empirical analysis combines two data sources: a case study of a non-profit institution; and the Survey of Employer-Provided Training, 1995 (SEPT95), which consists of training data collected from a cross section of establishments. The finding from both perspectives is that tuition reimbursement programs increase employee retention. The second chapter investigates the effect of HR practices on a different type of employee attachment: retirement. The widespread movement from defined benefit (DB) plans to defined contribution (DC) plans over the past few decades has transferred much of the retirement savings risk from the institution to the individual, particularly in the private sector. This chapter uses the Retirement Confidence Survey of College and University Faculty to examine the use of DC plans relative to DB plans among faculty and the impact of plan incentives on expected retirement age. This study finds that the difference in retirement wealth accrual patterns between the two types of plans generates an eight-month difference in expected retirement ages for individuals in a DC plan relative to those in a DB plan. Preferences over career length double the effect of incentives: individuals who elect to enroll in a DB plan expect to retire sixteen months earlier than those who chose to enroll in a DC plan. In addition, this chapter finds that individuals choose retirement plans to diversity their sources of retirement income, which has implications for proposed policies that incorporate individual accounts into Social Security.