Tax law fueling changes to employer benefits and executive pay programs

The recently-enacted tax reform law, the Tax Cuts and Jobs Act (P.L. 115-97), is fueling changes to corporate America’s employee benefits, compensation, and executive pay programs, according to a survey by Willis Towers Watson. The survey of 333 large and midsize employers reveals nearly half (49 percent) of the respondents are considering making a change to at least one of these programs this year or next.
“The tax reform law is creating economic opportunity to invest in their people programs,” said John Bremen, managing director, human capital and benefits, Willis Towers Watson. “While a significant number have already announced changes to some of their programs, the majority of employers are proceeding to determine which changes will have the highest impact and generate the greatest value.”

Benefit programs

Two-thirds of those (66 percent) surveyed are planning or considering making changes to their benefit programs or have already taken action. The most common changes organizations have made or are planning or considering include expanding personal financial planning (34 percent), increasing 401(k) contributions (26 percent) and increasing or accelerating pension plan contributions (19 percent). Other potential changes include increasing the employer health care subsidy, reducing or holding flat the employee payroll deduction, or adding a new paid family leave program in accordance with the Family and Medical Leave Act’s tax credit available for paid leave for certain employees.

Compensation

Sixty-four percent of employers are planning or considering taking action on their broad-based compensation programs, or have already taken action. The most common changes organizations have made or are planning or considering include conducting a review of their compensation philosophy (43 percent), addressing pay-gap issues (36 percent) and introducing a profit-sharing or one-time bonus payout to all employees (21 percent).

Executive pay

About four in ten companies (41 percent) are also planning or considering changes to their executive pay programs, or have already taken action. The most common changes employers have made or are planning or considering include spending more time and analysis on this year’s incentive target (33 percent) and increasing the use of discretion in 2018 incentive plans (19 percent).
“The results of our survey, coupled with the actions taken by some large employers over the past few weeks, suggest that investing in their people remains a top priority. We fully expect most organizations will take the time to thoughtfully evaluate the impact of the tax law on their organization and then make changes that support their specific business strategy,” said Kathy Walgamuth, director, communication and change management, Willis Towers Watson. “The tax law and subsequent company announcements have made headlines, so employees may already have established their own set of expectations. Wherever an organization lands, even if the decision is made to not take any direct action for employees, it’s essential for them to consider the need to communicate and address employee questions.”

Source: Willis Towers Watson press release.
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