While savings from the new tax reform law will likely be used by companies to invest in operations, or even banked, many may use the money on their people.
Companies are responding to the Tax Cuts and Jobs Act, a $1.5 trillion tax reduction program that became law Dec. 22, 2017, a new survey finds. And the heart of the law is a reduction of the corporate income tax rate.
“This creates a tremendous opportunity for companies to invest in their people,” said John Bremen, managing director, human capital and benefits, Willis Towers Watson, told FierceCEO. “Companies are getting a pretty big opportunity to save on their taxes and as people become more engaged it will lead to higher financial performance.”
Over 36 of America’s biggest companies have shared their tax-cut windfalls with employees, largely through one-time bonuses but also with hourly wage increases and bigger 401(k) matches, according to USA Today.
The latest include FedEx and Honeywell. FedEx said it was boosting employee compensation by $200 million, two-thirds for wage increases for hourly workers and the rest to performance-based incentive plans. Honeywell said it would up its 401(k) match, USA Today said.
These announcements follow similar moves by employers such as Home Depot, Walmart and Walt Disney Co., according to USA Today.
In a survey by Willis Towers Watson, two-thirds of employers (66%) are planning or considering making changes to their benefit programs, or have already taken action.
The most common changes include:
- Expanding personal financial planning (34%)
- Increasing 401(k) contributions (26%)
- Increasing or accelerating pension plan contributions (19%)
Other potential changes include increasing the employer health care subsidy, reducing or holding flat the employee payroll deduction, or adding a new paid family leave program in accordance with the Family Medical and Leave Act's tax credit available for paid leave for certain employees.
Sixty-four percent of employers are planning or considering taking action on their broad-based compensation programs, or have already taken action. The most common changes organizations have made or are planning or considering include conducting a review of their compensation philosophy (43%), addressing pay-gap issues (36%) and introducing a profit-sharing or one-time bonus payout to all employees (21%).
About 4 in 10 companies (41%) are planning or considering changes to their executive pay programs, or have already taken action. The most common changes employers have made or are planning or considering include spending more time and analysis on this year’s incentive target (33%) and increasing the use of discretion in 2018 incentive plans (19%).