Studies have shown the positive effects of a firm’s corporate social responsibility (CSR) on its employees. However, there is limited understanding of how this relation changes due to differences in CSR strategic approaches and identities of individual employees. This study uses social identity theory to develop a cross-level model to describe the effects of adopting a more proactive CSR approach on the development of firm-level identities and the evaluation of employees with different sub-group identities. It uses the context of family firms to explain how a firm can use its firm-level identity to address inter-group problems, that is, family versus non-family employees. The experimental evidence shows the positive effects of a more proactive approach on employees’ evaluation of the firm indirectly through the development of two types of firm-level identity: one based on CSR values and one on corporate competency in providing products and services. Both can improve employees’ perception of the firm, though the former has stronger effects. These indirect effects are stronger for out-group non-family employees, especially when they have the opportunity to participate in decision-making processes. The findings show the potential value of using a CSR strategy in human resource management without threatening a particular employee group.