The 2024 Government Work Report proposed the strategy of "adopting multiple measures to stabilize employment and increase income" and emphasized that "employment is the most fundamental livelihood," making "employment stability" the top priority for ensuring livelihoods and maintaining the stable operation of the social economy. As micro participants in macro policies, individual enterprises' labor force employment determines the overall employment rate and quality in China. At a critical period of structural economic development and transformation, the implementation of the strategy for strengthening the country with talent and prioritizing employment, as emphasized in the 20th National Congress of the Communist Party of China, becomes a key means to achieve the goals and tasks of the "14th Five-Year Plan" period. The Central Financial Work Conference at the end of 2023 proposed the significant goal of building a "strong financial country," with emphasis on elevating the significance of "digital finance" to a national strategic level. Against this backdrop, this paper investigates how digital transformation impacts the employment structure of enterprises and the underlying mechanisms. The first part of the paper establishes a theoretical model linking digital transformation with enterprise investment and labor employment decisions. It treats a firm's digital transformation as an investment and combines it with employment decisions for labor with different skill sets. Within the traditional C-D production function, a new production function embedded with digital transformation capital is introduced, establishing a new decision problem for maximizing enterprise profits. Furthermore, based on this novel theoretical model, four research hypotheses are proposed for empirical examination. In the second part of this paper, using annual report textual data from non-financial A-share listed companies from 2012 to 2020, a method of keyword extraction and text analysis is employed to construct a digital transformation index for each enterprise. Subsequently, an econometric regression model linking the level of labor employment in enterprises with digital transformation is established to empirically test the theoretical predictions. Consistent with the theoretical predictions proposed in the paper, the empirical results reveal that digital transformation significantly increases the level of labor employment in enterprises. Digital transformation also reduces financial constraints, enhances skill premiums, and optimizes the internal labor structure of enterprises. All findings remain robust after employing various robustness tests including instrumental variables, exogenous policy shocks, propensity score matching (PSM), and alternative proxies and samples. In terms of economic significance, one standard deviation increase in the digital transformation index leads to a 21.99% increase in the total labor employment level in enterprises, with the proportion of high-skilled labor employment increasing by an average of 3.0%. Further analysis demonstrates that digital transformation significantly enhances enterprise information transparency, thereby improving labor investment efficiency. Regarding heterogeneous effects, the enhancement of labor investment efficiency by digital transformation is particularly evident in non-state-owned enterprises, labor-intensive, and technology-intensive enterprises. Moreover, digital transformation plays a consistently stable role in enhancing enterprise profitability and growth. Building on existing literature, this article has contributed in the following aspects: 1) The current literature on digital transformation primarily focuses on empirical research. This paper breaks new ground by emphasizing enterprise digital transformation investment, and by leveraging the advantages of digital transformation in enhancing capital output efficiency, reducing production costs, and integrating labor production factors with different skill levels, it innovatively proposes a new production function that incorporates enterprise digital transformation. Our paper establishes a theoretical model with digital transformation investment as the focal point of enterprise decision-making; 2) The paper presents several novel theoretical findings and empirically tests these using data on digital transformation in Chinese enterprises. By examining the impact of digital transformation on enterprise employment decisions from both theoretical and empirical perspectives, our study advances research in this field