21 Mar Breakdown of employee gains from corporate tax cut
HR pros have seen plenty of news stories about giant corporations that are passing along the savings from the new tax law to their employees. But until now, it’s been tough to get a picture of just how many employers, percentage wise, are actually going to make such a move.
Overall, 79% of employers are anticipating tax savings from the new tax law, according to Mercer’s Impact of US Corporate Tax Reform on Employee Rewards poll.
Nearly a third (32%) of employers plan on redirecting at least some of those savings to their employee rewards programs. But 47% said they don’t plan on redirecting those savings back to employee programs.
Only 22% of employers said they didn’t anticipate any tax savings as a result of the new law, the study found.
(Note: Due to the set-up of the study, the percentages don’t add up to 100%.)
Specifically, of those who said they’d redirect the savings, employers said they’d:
- invest in employee training and development programs (11.2% of employers)
- increase minimum wage (10.7%)
- increase retirement plan contributions (10.1%), and
- provide a one-time bonus to non-execs (9%).
According to Mary Ann Sardone, a partner and the North America Workforce Rewards Practice Leader with Mercer, the findings suggest employers are thinking of strategic ways to use the tax savings for long-term goals.
“Using redirected tax savings for employee training and development signals that many companies are looking for longer-term investment in their human capital. While tax reform is still new, many companies are considering a wide range of potential employee investments as they evaluate their approach. As with any strategic human capital investment, alignment with overall business and people strategy is critical to having a lasting impact.”
A number of major corporations have pledged to pass along some of the savings they’ll reap from the new 21% corporate tax rate (down from 35%) in the form of raises, bonuses and new investments in human capital.
One major example is AT&T. The company announced it would give a $1,000 bonus to more than 200,000 U.S. workers and invest $1 billion in the U.S. economy because of the new tax law.
Here are a few additional examples, courtesy of The Daily Signal:
- Aflac: $250 million boost in U.S. investments and increased 401(k) benefits, including a one-time contribution of $500 to every employee’s retirement savings account.
- American Savings Bank: $1,000 bonus to 1,150 employees (nearly the entire workforce), and increase minimum wages from $12.21 an hour to $15.15.
- Aquesta Financial Holdings: $1,000 bonus to all employees, and increase minimum wages to $15 per hour.
- Associated Bank: $500 bonus to nearly all employees and increase minimum wage to $15 per hour, up from $10.
- Bank of America: $1,000 bonus for about 145,000 U.S. employees.
- Bank of Hawaii: $1,000 bonus for 2,074 employees, or 95% of its workforce, and increase minimum wages from $12 to $15.
- BB&T Corp.: $1,200 bonus for almost three-fourths of associates, or 27,000 employees, and increase minimum wages from $12 to $15.
- Boeing: $300 million boost in investments to employee gift-match programs, workforce development, and workplace improvements.
Industry insiders, such as Adam Michel, policy analyst for economic studies at The Heritage Foundation, see the moves corporations are making as proof tax reform is working. According to Michel:
“Raises, bonuses, and new investments spurred by tax reform show that the Republicans’ tax reform is working how they said it would. Businesses across America are putting their tax cuts to work for the American people. This first wave of stories is great news, but the real benefits are yet to come. Tax reform expands the economic pie so that more Americans will be better off.”