With the changes to the corporate tax rate as a result of the U.S. Tax Cuts and Jobs Act of 2017, many companies are considering how they can use their corporate tax break to retain employees. This is a timely concern: One of the biggest challenges companies face is employee retention—research from ADP finds that about 60–70% of turnover in each industry is voluntary, and Gallup found that 93% of US adults left their employer to change roles. Why are so many employees choosing to leave? Many of them are unsatisfied with the growth and development opportunities in their current roles. An ADP study on turnover found that employees leaving a company were 38% more likely to feel they didn’t have career opportunities there while employees who stayed were 24% more likely to say they had access to the learning and development opportunities they needed. Culture Amp’s survey data across companies has observed a similar trend: People who have jobs that contribute to their development are 21% more likely to stay.
Companies—and employees—are rethinking total rewards
The definition of “rewards” has shifted to mean much more than financial compensation—it now includes anything from L&D to well-being to 401k matching. A recent article on the HR Times blog put it this way: “Rewards are both key to differentiating your company as an irresistible place to work, and an essential element of your overall talent strategy.” However the same article cited research from Deloitte showing that $1,500 per full-time employee is typically wasted on “benefits workers don’t value or appreciate.” Whether you’re offering an Employee Assistance Program or life insurance that no one knows exists or student loan refinancing to an employee base who doesn’t need it, chances are that some of your benefits are not appealing to your employees. There’s a real opportunity for employers and employees to work together to come up with a rewards offering that works for everyone—and it’s never been more timely.
The corporate tax break presents a real opportunity for companies
The corporate tax break resulting from the U.S. Tax Cuts and Jobs Act of 2017 means that many companies are experiencing a sudden windfall. A number of companies, as detailed in this New York Times article, are using this as an opportunity to reinvest the savings in their business. Some are increasing their hourly wages or offering one-time bonuses, other companies are making charitable contributions, and others are investing in employee-centric programs like increasing 401k matching, extending parental leave, and investing the money in L&D programs. If you’re not sure whether your company is benefiting from these changes, be sure to check in with your HR or Finance team to find out. How should you choose the right approach for your company if it turns out you do have access to these unexpected funds? Here are four points to keep in mind.
4 ways to offer the most relevant benefits to your employees
1. Consider the impact of a one-time event vs. an ongoing offering
Many organizations are opting to spend their tax savings by paying out one-time bonuses to their employees. This can definitely boost morale and happiness, but be aware of the fact that this boost is generally only temporary. Studies have shown that happiness peaks briefly after a raise or bonus, but quickly returns to base level.
There are other risks to this approach as well: Employees may feel slighted and question the amount they receive in comparison with the company’s overall savings, they may be upset to learn that they’ll be taxed on this additional income, or they may not feel any connection between the bonus and the work they’re doing on a daily basis. As Deloitte’s Human Capital Principal Michael Niciforo and Managing Directors Garry Spinks and Naomi Bradley write in HR Times: “It also does little to connect workers to a bigger, longer-term value proposition of how the organization views and values them.”
On the other hand, an ongoing offering, like 401k matching, Learning & Development (L&D) budget, or allowing employees to take time off to volunteer, may lead to longer lasting happiness and more positive feelings about their employer.
2. Think more holistically about rewards
The relationship between employer and employee has changed, and it’s important to acknowledge that. In order to create rewards that are meaningful, employers must think holistically about the employee experience. “An increasingly diverse workforce is seeking more than these traditional rewards and is equally focused on things such as well-being, career development, and recognition. Workers have moved from seeking total rewards to seeking ‘total relationships’ with their employers,” write Deloitte’s Human Capital Principal and Managing Directors in an HR Times article. Consider the fact that your employees may value other rewards and experiences more than salary and bonuses. They may appreciate opportunities to learn, give back to their community, or participate in unique experiences like those Blueboard offers to boost employee engagement and satisfaction. For example, meaningful rewards could could be letting employees choose their own experiences like learning to scuba dive or taking a cooking class.
3. Consider offering learning & development as a lasting and meaningful benefit
One of the more holistic and lasting ways to take advantage of your corporate tax break is to offer learning & development (L&D) benefits for your employees.
Some companies, like Disney, are turning their tax breaks into opportunities for their employees to learn and grow. In response to the cuts in the corporate tax rate, Disney recently announced a new education initiative for its 88,000 hourly US workers. Participants in the program can choose to use the benefit to pay for higher education or vocational training, and the courses do not need to be related to their current work responsibilities.
If your company can’t or has chosen not to raise pay or offer bonuses, this doesn’t have to negatively impact your employees. Offering increased L&D benefits can be the key to engaging and retaining people and giving them a broader sense of purpose in their work. Investing in your employees’ skills will also contribute to your company’s productivity and innovation in the long-run.
4. Ask your employees what they want
Finally, if your goal is to create a more holistic approach to rewards and benefits, one of the best ways to achieve this is to encourage a dialogue with your employees. You can find out exactly what they value simply by asking them. Not only does this ensure that you’re spending money on rewards that matter, but it also shows employees that you value and respect their opinion, an essential step in building a stronger employer/employee relationship.
Whether your company is benefiting from the corporate tax break or not, these recent changes present the ideal opportunity to engage with your employees and determine which benefits they truly value.