Employers mixed on how to share tax reform savings with employees
President Donald Trump’s tax reform, which slashed the corporate tax rate to 21%, from 35%, has allowed employers to share those savings with their workers, whether that’s a change to the benefits package, such as 401(k) match increases or student loan repayment contributions, or one-time bonuses and minimum wage increases.
Some employers, however, are unsure about what the best strategy is for sharing tax reform savings, according to a new survey from executive compensation consultancy Pearl Meyer.
Since the passage of the Tax Cuts and Jobs Act of 2017, 20% of the 300 companies polled by Pearl Meyer have provided some enhanced benefits, with 35% of those respondents considering further changes to their benefits package.
Of companies that have already made changes, 95% said they have made structural changes to compensation first, followed by increasing salaries and retirement benefits. Sixty-five percent of companies, such as AT&T, Home Depot and Disney, handed out $1,000 one-time bonuses to employees, while 46% of employers increased the minimum wage.
Only 9% of employers enhanced their benefits packages, with an additional 12% of employers increasing their retirement benefits. However, one in five employers are considering making changes to retirement preparation (20%) and enhancing benefits (23%). Fifteen percent of employers are also considering reducing healthcare costs, a move recently announced by CVS Health.
More than half (52%) of employers are not planning any changes to their benefits package because they are unsure of or not anticipating a significant tax benefit, or are funneling those savings into other programs, like profit sharing plans and equity awards, according to the survey.
The New York-based executive compensation consultancy firm suggests that companies without any plans to share tax reform savings with employees develop “a solid communication plan to explain their rationale.”