The Impact of Employer-Sponsored Childcare Facilities on Employee Retention: A Fuzzy Regression Discontinuity Approach

Firms increasingly recognize that retaining skilled workers is more valuable than continuously replacing them. Employer-sponsored childcare, therefore, serves as a strategic human resource investment aimed at reducing turnover and retaining valuable, trained employees. However, empirical evidence on the impact of employer-sponsored childcare facilities on employee retention remains limited. This study examines the causal effect of employer-provided childcare facilities on employee retention in India using a Fuzzy Regression Discontinuity Design. The analysis leverages the Maternity Benefit (Amendment) Act 2017, which mandates firms with 50 or more employees to provide access to a nearby childcare facility, treating the number of employees in the previous financial year as the running variable. Using data from 1,170 firms, the study measures the average length of employment in the previous financial year as the outcome variable. The results indicate that having employer-sponsored childcare facilities increases the average employment duration by 6.56 months. These findings underscore the significance of employer-sponsored childcare as a valuable policy tool for enhancing employee retention. Grounded in Human Capital Theory (Rees, 1965), this study suggests that investing in employees enhances retention.