When I heard Americans for Tax Reform had compiled a list of companies that have announced that what they are doing with their tax savings, I was curious to see how those actions stack up against what employers told us in our recent survey on tax reform.
The ATR list is compiled from news stories and companies reporting in directly. Of the 300+ companies currently on the list, the most common action reported, by nearly 75%, is giving at least some employees a one-time bonus. Close to 20% are increasing the starting/minimum wage. Less common actions, in descending order, include:
- Increases to charitable donations
- Other compensation increases
- Enhancements to retirement plan benefits
- Improvements to other welfare benefits
The ATR list only looks at employers that have decided what they are doing with their tax savings. In our survey, which was conducted in January and captured the responses of 241 employers, about a third (32%) said they had plans to redirect some of their corporate tax savings to employee-related programs. The most common action planned was to increase investments in employees training. Other actions, in order of popularity, include:
- Increasing the starting/minimum wage
- Increases in defined contribution retirement plan contributions
- One-time non-executive employee bonuses
- Increase in salaries/merit pool for non-executives
- Increases in non-executive employee benefits
Many companies, 47%, are not planning to redirect tax savings or have not yet decided what to do. One consideration will be just how much of a windfall is expected from the change in effective tax rate. More than a fifth (22%) of the companies that responded to the Mercer survey do not expect to get a reduction in their effective tax rate. How could that be? The more business conducted outside the US, the less impactful the change. Also, some companies may have been more successful in maximizing deductions and lowering their tax bill prior to the new law. Regardless, given all the publicity, your workers are likely wondering if and how the tax change will benefit them. It’s worth considering communication on the subject to frame the discussion and manage expectations.