This blog was originally published on the Willis Towers Watson Wire, February 15, 2018.
Many, but not all, corporations are in the enviable position of determining how to spend expected savings created by the Tax Cuts and Jobs Act of 2017 (TCJA). There are any number of ways to do this, including, for example: Acquisition for growth or synergies, building new facilities to expand manufacturing or distribution, funding additional research and development, and investing in talent. What might surprise you is that nearly half (48%) of companies we surveyed are considering investing in employee human capital and benefits programs.
Click here for FREE guidance and resources on tax reform.
In fact, well over twice as many companies are planning or considering changes to their broad-based employee compensation plans (64%) or Total Rewards strategies as those that are thinking about share buybacks or dividend payments (26%), according to a Willis Towers Watson survey conducted weeks after President Trump signed TCJA into law on December 22, 2017. And it’s considerably more than those that are thinking about paying down debt (38%).
Companies seem well aware that there’s an enormous economic opportunity to invest in people programs and examine possible changes through a Total Rewards lens. The right program can attract and retain highly skilled or needed talent and modernize the workforce with new kinds of workers.
Three approaches to Total Rewards changes
Companies are embracing three approaches to harnessing freed funds from the drop in the corporate tax rate from 35% to 21% under the new U.S. tax law. It’s important to note, though, that the impact of the law will be different for each organization.
The majority of employers are still analyzing which changes will have the highest impact and generate the greatest value. While it’s urgent for companies to act, given that employers are seeking to optimize what can amount to multi-billion dollar investments in human capital and benefit programs, it’s also important to take a thoughtful, analytical approach that delivers strategic benefits.
But how do you direct Total Rewards dollars to programs that matter most to key employee groups in a way that delivers the highest ROI to your organization?
We recommend the following steps:
Informed decision making
Benchmarking strengthens Total Rewards decision-making, and findings from our survey can help employers understand actions taken or contemplated by other companies. Many companies have taken at least one action, or are planning or considering investments in their people programs in several key areas: Hiring and expansion/financial transactions (60%); benefits programs (66%); broad-based employee compensation (64%); and executive compensation (40%). Employee benefits and compensation, in particular, are areas your competitors may be looking to change, our survey found. Actual or planned changes reported in our survey cover 2017 to 2019.
Employee benefitsCapturing the opportunity
The new U.S. tax law presents companies with a significant opportunity to deliver value to shareholders, customers and employees. A Total Rewards lens can help deliver economic value and build a path that attracts and retains the workforce for their future.
Blog Contributor
John Bremen is Managing Director of Human Capital & Benefits, North America, at Willis Towers Watson. John works with boards and senior executives to align human capital and benefit strategies and practices with business strategies in order to drive broad-scale organizational performance. He has deep expertise and consulting experience in the area of Total Rewards, and is a recognized subject matter expert and thought leader in this space. John is a longtime WorldatWork member and volunteer, and served as Chairman of its Compensation Advisory Board for many years.