Benefits and employees’ work effort: an empirical analysis of non-monetary incentives

Despite extensive literature on incentives to increase employees’ work performance, economic research on employer-provided non-monetary benefits remains rare. This study investigates the relationship between benefits and employees’ work effort utilizing data from the German Socio-Economic Panel. The analysis is based on data from eleven survey waves from 2006 to 2022 and considers five benefit types: meal stipends, firm cars, phones and computers for personal use, as well as expense payments exceeding minimum costs. The results reveal a modest positive association between benefit receipt and employees’ work effort, measured as the difference between actual and contractual working hours per week. On average, benefit receipt is associated with 13 minutes (0.22 hours) additional work per week. Furthermore, receiving a greater variety of benefit types is linked to even higher work effort, with two to five or more benefit types associated with an average increase of 27 to 97 minutes (0.45 to 1.62 hours) of extra work per week. However, the effectiveness of benefits does not seem to be universal but varies depending on the type of benefits as well as individual and organizational characteristics. Notably, the positive association of benefits with work effort appears significantly higher for males than for females, and sectoral differences are evident. These findings underscore the importance of further research to better understand the specific conditions under which benefits can effectively enhance employee work effort.