If you plan to share anticipated tax savings with workers, how can you make the impact truly meaningful?
Due to the reduction in corporate tax rates in the Tax Cuts and Jobs Act of 2017,1 companies have an opportunity to reinvest those savings in the business. Many are choosing to share the savings with their workers in the form of a cash bonus. But while these organizations’ intentions may be good, the outcome of this decision is a short-term, one-time event, rather than something that has longer-term impact. Why? It could be as simple as this: They didn’t ask workers about their wants, needs, and preferences.
Two underlying issues
While it might be hard to imagine that giving workers extra money could be perceived as anything but positive, the “what to do with the tax savings” question really calls attention to two underlying issues:
- Employers should be thinking more holistically about rewards to be able to optimize the value of their investment, and
- Employers should be looking to their workforce for guidance on the rewards workers find meaningful.
Consider that for the last 30 years or so, we’ve talked about compensation and benefits as “total rewards,” which were mostly financial…salary, health insurance, a 401(k), and the like. Today, and ongoing as the future of work continues to unfold, 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.
Many employers, however, are still stuck in the old, financially oriented rewards model. So when a cost-savings opportunity in the form of tax reform appears, oftentimes their first thought is to give workers a bonus. What could go wrong with that?
Unfortunately, this strategy could be detrimental on both sides: receiver and giver. For example, recipients could perceive the bonus as “too little, too late” or simply an attempt to follow the lead of other companies that provided a one-time bonus. Or it could be that a one-time bonus just isn’t that meaningful to the workers receiving it, or seems small in comparison to the company’s overall and ongoing tax savings. It also does little to connect workers to a bigger, longer-term value proposition of how the organization views and values them.
The organizations giving the reward—even with the very best of intentions—potentially risk bad press if the bonus is received poorly by workers. Or they could risk talent retention and acquisition issues if workers feel it’s not as worthwhile as what other companies offer.
- Stepping back to move ahead
Organizations can be doing so much more to make rewards more meaningful and build lasting employment relationships. It’s no secret that compensation and benefits are typically the largest expense organizations face, and our research shows that $1,500 per full-time employee (FTE) is typically wasted by offering benefits workers don’t value or appreciate. Given this, organizations should be looking at ways to help optimize the value of their human capital as a balance sheet asset—and that includes being more strategic about rewards.
Rewards are both key to differentiating your company as an irresistible place to work, and an essential element of your overall talent strategy (i.e., how you attract and retain the workforce you need to operate your business effectively). As the workforce continues to shift in terms of its composition (full-time, part-time, contingent, crowd), its demands, and its expectations, organizations have to be proactive if they hope to stay competitive. This involves purposefully and holistically managing the full scope of rewards offerings, which typically includes:
Source: Excerpted from the Total Rewards Framework, Bersin, Deloitte Consulting LLP, 2017
While the tax law changes may make it tempting to act quickly to pass along some of the savings to workers, they, and the business, will likely be better served by taking a step back and looking at the big picture of rewards in the context of the overall talent strategy.
- Asking rather than assuming
As the workforce grows more diverse in nearly all respects (age, gender, location, employment mode), it’s natural that workers’ needs and preferences are growing more diverse as well. The rewards that might appeal to one segment may not appeal to another, and rather than assuming a reward will be well-received, employers should be actively seeking to understand what workers value: That’s as simple and as obvious as asking them.
Ask workers to weigh in on various rewards and use their answers to help guide your rewards strategy. With the right survey tools to help, this can be a very cost-effective and timely process with the potential for numerous benefits, such as:
- Making workers feel valued and respected
- Identifying current rewards that are under-performing (i.e., not valued, or not valued enough to justify their cost)
- Uncovering opportunities to offer rewards that are both desirable and cost-effective
- Demonstrating commitment to workers and being known as an employer-of-choice
- Moving from a total rewards to a total relationships mind-set
Opening up options—and leveraging opportunities
This is a tremendous area of opportunity for employers. Deloitte Consulting LLP’s BersinTM conducted its first-ever High-Impact Rewards survey in 2017, and the results suggested that rewards packages across industries and geographies tend to detract from employee loyalty rather than inspiring it. This points to great potential for employers to get ahead of their competitors in turning this rather alarming finding around.
Consider how workers, if asked, might choose to benefit from ongoing corporate tax savings beyond a one-time cash bonus. Perhaps they might prefer a contribution to a retirement account or to an HRA (health reimbursement account). Perhaps they might value a contribution toward their student loan debt. Or a gym membership. Or extra time off.
The point is that once you know what workers value, you can begin to tailor rewards so they both meet workers’ expectations and provide positive ROI to your organization. Given the disruption in work today and the challenge to transition to the future of work, there’s never been a better time to rethink designing and delivering rewards as independent pieces in a one-size-fits-all approach. Cultivating a more holistic, total relationships approach can be a powerful differentiator in attracting and retaining the high-talent workers you need today to continue to meet the challenges of tomorrow.