Effects of Employer-Enabled Performance-Linked Savings on Savings Behavior of Workers and Firm Performance in the Garment Industry

This study is a Randomised Control Trial, wherein we offer a bank-based recurring deposit (RD) to production workers of Shahi Exports, a garment manufacturing firm in Karnataka, India. The RD would serve as a commitment saving instrument for workers, requiring fixed monthly instalments for 6 months. In our study, these instalments would be made from the workers’ salary through automatic payroll deductions facilitated by Shahi, their employer. Further, for some workers savings in their RD would be linked to and rewarded based on their tenure and attendance. With this set-up, the study is aimed at understanding if performance-linked employer-enabled commitment saving plans can simultaneously improve i) formal savings of low-income workers and ii) firm performance.

Along with a control group, the study involves three treatment groups. The first treatment group only receives access to the RD and automatic deductions in it. Second and third treatment groups, in addition to the RD and payroll deductions, also receive rewards linking their savings and performance. Comparing these groups, we evaluate the causal impact of each component of the savings plan on workers’ savings in the plan, their total savings and on workplace outcomes in terms of attendance and tenure.

2024-02-15

2024-08-15

For Participants' Savings :
1. Take-up of the offered savings plan
2. Usage of the offered savings plan, as measured by
a. number of deposits in a given time-period
b. sustained saving in the instrument (without premature closure)
3. Amount of savings in the offered savings instrument
4. Amount of savings in formal savings instruments
5. Amount of savings in informal savings instruments
6. Amount of total savings (across all owned savings instruments)

For Firm Performance :
1. Absenteeism among workers in the factory
2. Attrition among workers

It might be useful to describe how firm performance is measured.
1. Absenteeism is measured as the number of working days for which a worker was absent in a month.
2. Attrition is captured through workers' likelihood of exit in a given month. The last working day a worker was present in the factory is taken as the exit date of that worker.

Control - Business as usual. For these workers, the attendance bonus will be deposited in their payroll account, along with their salary.

Treatment 1 - Workers will be offered to open an RD and a zero-balance savings account linked to it. For these workers, the employer would deposit the amount equivalent to the attendance bonus in the RD linked savings account, while regular salary gets deposited in the payroll account as usual.

Treatment 2 - Workers will be offered the savings plan as described in Treatment 1. In addition, conditional on completing a tenure of 6 months with the employer, and continuing to hold the RD during this time, workers will be offered a top-up interest rate by the employer.

Treatment 3 - Along with all the offered savings plan and top-up interest rate mentioned in Treatment 2, workers will further get an attendance reward, which is proportionate to the total attendance bonus earned in the 6 months of the study.

Not available

Randomisation would done in office by a computer.

Unit of randomisation would be an individual worker.

No

1200 workers

1200

300 workers in each of the treatment arms

15% take up among treatment 1 workers who are offered an RD and the the facility to automatic monthly deductions in it.