Employers Giving Out Tax Cut Bonuses—or Is It Posturing?

Corporations say that they'll share tax savings with workers and invest in job growth, but critics are skepitcal

Stephen Miller, CEBS By Stephen Miller, CEBS January 4, 2018
Employers Giving Out Tax Cut Bonuses—or Is It Posturing?

Like so much else in today's polarized political environment, whether the 2017 tax act that President Donald Trump signed into law on Dec. 22 will create new jobs and lead employers to raise workers' pay is hotly debated. Some initial responses from employers and their critics, as reported in the media, follow below.

American and Southwest Airlines Join Companies Promising 'Tax Bill Bonus' for Employees

American Airlines and Southwest Airlines said on Jan. 2 they would give their employees a $1,000 bonus in light of the recent U.S. tax bill. The airlines join a host of other companies promising to pay bonuses or invest more in training after the biggest overhaul of the U.S. tax code in 30 years, which cuts the corporate tax rate. American Airlines will distribute the bonus to each team member, excluding officers. Southwest said that as well as paying the bonus to all employees in January, it was increasing its fleet investment with Boeing and had donated $5 million to charitable causes.
(Reuters via Fortune)

Gary C. Kelly, the CEO and chairman of Southwest Airlines, tweeted:

AT&T, Comcast, Wells Fargo Promise Bonuses or Pay Hikes from Tax Cuts

AT&T was the first company to go public with its plans to pass along coming tax savings to workers, saying once the tax bill is signed it will pay a special $1,000 bonus to more than 200,000 nonmanagement workers. The telecom giant also confirmed it would invest $1 billion more in the U.S. in 2018. Comcast announced it would award one-time $1,000 bonuses to more than 100,000 employees, which would include frontline and nonexecutive employees. Other companies, including Fifth Third Bancorp, Wells Fargo and Boeing, also announced that they would pass along tax savings to their workers.
(USA Today

Aflac Will Increase Its 401(k) Match

Supplemental insurance firm Aflac said that, as a result of the tax act, it will increase its 401(k) employer match from 50 percent to 100 percent on the first 4 percent of employee contribution while making a one-time contribution of $500 to every employee’s 401(k) plan. Aflac will also offer certain hospital and accident insurance products to all employees free of charge, and expects to increase overall investment in the U.S. by approximately $250 million over three to five years.

"We are pleased that these tax reforms provide Aflac with an opportunity to increase our investments in initiatives that reflect our company values," Aflac chairman and CEO Dan Amos said. "We will use these funds to help secure healthy retirements, develop employee skills in an evolving global business climate, and provide additional protections for our workers and their families."

Update: Nationwide Insurance also will increase contributions to employees' 401(k) savings plans as a result of the recently passed tax law, 401kSpecialist reported, and so, too, will credit card provider Visa, CNBC reported.

Critics of the Tax Bill Are Skeptical

Democratic lawmakers and corporate watchdogs said the coordinated announcement of corporate bonuses was a public relations stunt that pales in comparison to the profits the companies' shareholders and executives will reap because of the lower tax rates. The stock market, as well, has risen on the belief the savings will largely go to investors, rather than workers, critics charged.
(Fox News)

[SHRM members-only toolkit: Designing Executive Compensation Plans] 

Sharing the Wealth or PR?

Wells Fargo said it would raise hourly pay to $15 and aim to give $400 million to community and nonprofit organizations next year, due to the tax bill. But that's just 2 percent of the $3.7 billion windfall the bank is predicted to get from the tax bill next year, the New York Times' Binyamin Appelbaum tweeted.


Will Companies Spend Tax Savings to Create Jobs?

According to a Yale University survey of 110 leaders of Fortune 500 and Fortune 50 companies, 14 percent said they were planning to make big capital investments if the Republican tax bill passed. A Business Roundtable poll found that 43 percent of CEOs plan to increase hiring over the next six months following enactment of the tax legislation. Nevertheless, Jeffrey Sonnenfeld, a professor at Yale School of Management who leads the Yale CEO Summit, called it "astounding" how few companies plan to reinvest their tax savings.

Tax Bill Will Alter Executive Pay, Affect Bonus Decisions

The passage of the 2017 tax act will cause some employers to revisit their executive compensation programs, since new restrictions apply to deductible income for the top leaders at for-profit and nonprofit organizations.
(SHRM Online)

Related SHRM Article:

Walmart Attributes Higher Starting Wage, Expanded Benefits to Tax Reform, SHRM Online Benefits, January 2018

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