Are Employees Benefiting from their Company’s Tax Savings 

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Jan 25 2018

Almost immediately following the passage of the new tax law in December, the announcements began. AT&T and Comcast said they would pay $1,000 bonuses to workers. Wells Fargo raised their base wage to $15 per hour and will donate $400 million to non-profits and community organizations. AFLAC, SkyWest Airlines, and Visa increased their 401k match. The most unique announcement we’ve seen came from AutoNation. They are covering the full cost of cancer insurance for employees, spouses and children to age 26.

All this activity and publicity has prompted interest in what other employers – including those that are not household names – are doing with their tax savings. We fielded a quick pulse survey and captured the responses of 241 employers. Almost a third (32%) said they plan to redirect some of their corporate tax savings to employee-related programs, while 47% said they were not planning to do so. The rest (22%) don’t anticipate seeing a reduction in their effective tax rate.

Among those planning to redirect the savings to employee programs, the specific actions planned, in order from most to least popular, include:
• Increase investments in employee training
• Increase in starting/minimum wage
• Increase in defined contribution. retirement plan contributions
• One-time non-executive employee bonuses
• Increase salaries/merit pool for non-executives
• Increase non-executive employee benefits

These actions are a mix of one-time rewards and true enhancements to pay or 401k match. We may have asked the question a little too early, as many companies are still evaluating the amount of their tax savings and options for reinvestment and/or return to shareholders. No doubt, the publicity around what companies are doing has raised the expectation of workers. It’s a good time to think about whether you can go further to enhance employee rewards or other programs in the upcoming years in light of the new tax law. If so, it might make sense to communicate the decision sooner rather than later, so your workers feel they are part of this (good) news cycle.

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