Navigating Flexibility and Employee Commitment: How Dutch firms combine Remuneration and Contract Policies

There is a growing scholarly interest in the pivotal role that employer policies play in shaping social inequality. Particularly, employer orientation (EO), i.e. how employers combine remuneration policy and the use of non-standard employment (NSE), may influence social disparities as they influence inequalities regarding job security and income. Previous empirical research on employer policies has mostly focused on either remuneration or contract policies. Research on how employers combine this is mostly theoretical. These studies usually distinguish between two types of orientations: market and organisational. Market oriented firms base their policies on the fluctuating dynamics of supply and demand within the labour market, and often use NSE and performance-based wages. Organisation oriented firms more often use permanent contracts and offer their employees a continuously increasing wage based on administrative rules such as wage scales. To our knowledge, this study is the first to empirically investigate how employers combine remuneration and contract policies. To do so, we use register data on employment from Statistics Netherlands linked to the structure of earnings survey. Since employer orientation is a multi-dimensional latent variable, we employ Latent Class Analysis (LCA) to cluster employers with similar orientations. In addition, we explore how industry, multinational status, collective bargaining agreement (CBA) and share of employees in different occupational levels influence a firm’s EO. The preliminary results show seven distinct clusters of firms. Five of these clusters align with the traditional dichotomy between market oriented and organizational oriented firms. However, the remaining two cluster, representing 36.8% of firms, reflect a more nuanced approach, where firms adopt various combinations of remuneration and contract policies that go beyond this dichotomy.