Companies across the country are increasing wages, upping retirement matches, or providing bonuses to employees in the wake of the recent tax reform bill.
As other companies make announcements on how they are changing due to the tax reform, it begs the question, should your organization follow suit? There are two factors to consider when evaluating whether to make a change to wages or employee benefits in light of tax policy changes.
First and foremost, it’s important to recognize that most of these companies are announcing the benefits to help with their retention strategy. Unemployment is hovering around 4 percent and predicted to drop further this year. While that’s a good thing for the economy, organizations are facing heightened pressure to recruit the best talent as the U.S. labor market continues to tighten. If your organization is also looking at ways to increase retention, then the tax reform may present an opportunity to do so.
Additionally, the National Small Business Association’s Year-End Economic Report for 2017 found that more than half of small-business owners feel the national economy is doing better than it was just six months ago. Compared to 43 percent who reported the same in December 2016 and 20 percent in December 2015, it’s clear that small-business owners are feeling optimistic about the economy. Many small-business owners may pair this confidence with the tax reform benefits when deciding on whether to give employees an unexpected financial reward.
As you ponder the implications of the recent tax reform, discuss the prospect of increasing compensation to your employees with your Board of Directors after analyzing your organization’s financials as well as employee performance. If you feel that your organization is in a strong place financially, then the tax reform benefits may present an opportunity to provide employees with a wage increase or one-time bonus. This could increase retention while also leading to a stronger, more engaged workforce.