Tax Reform

What Companies Are Really Doing With Their Tax Windfall (So Far)

Only 4% of companies have increased wages and 3% said they will next year. A further 13% are considering wages and 80% said they aren’t considering giving raises at all.

The GOP tax overhaul has inspired what seems like a flurry of action from companies looking to gain billions of dollars in potential savings. Every day, a new organization announces bonuses and wage increases.Others, however, are using their funds to lay off thousands of workers.

Despite the headlines, it turns out most companies aren’t doing much at all with their tax savings, according to a new survey from Willis Towers Watson. At least not yet.

The HR consulting firm asked 333 employers with at least 1,000 employees what they have done or plan to do as a result of the Tax Cuts and Jobs Act. Only 4% of companies said they had “increased wages for all employees”; an additional 3% said they planned to do so in the next year. While a further 13% said they’re “considering taking action this year or next,” a full 80% of companies aren’t considering giving raises at all.

“Companies are really spending time thinking about this,” said John Bremen, a managing director at Willis Towers Watson. “They’re trying to figure out what to do in terms of what’s going to be the highest impact and greatest value.”

Bremen sees three general trends among employers. One group is using the tax bill windfall to make previously planned investments, such as raising the minimum wage or increasing 401(k) contributions. Another group is trying to modernize their workforce by hiring new kinds of workers. The third group is attempting to keep up with the proverbial Joneses: As companies see their competitors offering headline-grabbing bonuses, they feel compelled to do the same.

At this rate, it’s too early to tell what the trickle-down impact of the bill will be, if any. The bonus and wage increases provided to employees have, so far, been a fraction of the savings companies are seeing from the tax bill. It will take years to determine the full impacts of the bill, economists say.

Still, employees are seeing some changes. Almost 20% of companies surveyed said they had already added Roth 401(k) retirement plans for employees, making it the most popular benefit change as a result of the tax bill. Unlike a traditional 401(k), a Roth taxes money up front when it goes into the account, rather than down the line when it comes out.

“Many employers are saying ‘Tax rates are lower, I’d rather pay taxes on the lower amount than pay gains in the future,’ because maybe they will go up in the future,’” Bremen said.

Not all workplace upgrades come in the form of money. Around 40% of companies said they have already taken at least one “action” as a result of the tax bill, from increasing hiring to spending money on automation. “I’m not seeing a preponderance of any one thing companies are doing,” said Bremen. “There’s no one-size-fits-all.”

By Rebecca Greenfield

 

TAGS: Talent
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish