Survey finds organizations mixed about sharing tax benefits with employees

Organizations are almost evenly split about whether or not they have or may increase pay and benefits for employees in reaction to the new tax reform law, according to a new survey from executive compensation consultancy Pearl Meyer. More companies are still considering changes compared to those that have already taken action.
Less than sixty days after the Tax Cuts and Jobs Act became law, nearly 20 percent of responding organizations have provided some enhanced benefits and approximately 35 percent are considering new or additional changes.
Key findings of the survey include:

  • 12 percent have already made changes;
  • 7 percent have already made changes and are considering additional changes;
  • 29 percent are considering changes; and
  • 52 percent of respondents are not planning to make any changes to their broad-based employee reward system.

“The respondents who don’t plan to take any action cite multiple reasons, including the fact that they don’t anticipate their company will recognize any benefits from the new tax structure or they already offer programs like profit sharing, which are directly correlated to the profitability of the organization,” said Dan Wetzel, managing director at Pearl Meyer. “Because there is such a public focus on the companies who are taking actions such as a one-time bonus, we suggest that those who are not making changes be prepared to answer employee questions by developing a solid communications plan to explain their rationale.”
Of companies that have already made changes, 65 percent awarded a one-time cash bonus, most commonly $1000 (54 percent) or less (27 percent). Close to half (46 percent) increased their minimum (or hourly) wage. Additionally 42 percent of the companies made other structural changes to pay and benefits (e.g., merit pool increases, enhanced benefit programs, increased retirement contributions, etc.) Of the companies considering action, 47 percent are planning or considering a cash bonus, 34 percent are considering an increase to their minimum (or hourly) wage, and 58 percent are considering making other structure changes to pay and benefits.
The top reasons for making changes were sharing the benefits of tax reform (70 percent), rewarding/recognizing employee importance to success of the business (67 percent), and staying competitive (32 percent). Respondent reasons for contemplating future actions generally mirror the rationale for those that have already taken action, although these companies cite considering the competitive environment more often and fewer anticipate improved expectations for their business.
The number of companies considering capital investments (23 percent) outweighs those who already have announced taking that step (5 percent). Just 4 percent have plans to increase hiring and 7 percent are considering a larger workforce.

SOURCE: Pearl Meyer.
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