In the wake of recent updates to the US tax law, many prominent businesses have announced employee bonuses, and in some cases, increased hourly earnings in order to ensure that employees reap some of the financial benefits that the revised tax code yields for businesses.
FedEx, Apple, Home Depot, Starbucks, Disney, American Airlines, Boeing, AT&T, Wells Fargo, JP Morgan, Comcast, Bank of America, Fifth Third Bank and Walmart are just some of the employers that have extended financial perks to their employees recently. Here are some of the details:
- Insurance company Anthem will give $1,000 to the retirement accounts for more than 58,000 employees and prevent retirees.
- Best Buy will pay one-time bonuses of $1,000 to full-time workers and $500 to part-time employees.
- CVS Health will increase employee pay for hourly employees to $11 per hour from $9 per hour starting in April 2018.
- Walmart will provide a one-time cash bonus for eligible employees of as much as $1,000. Plus, it is increasing its starting wage rate for hourly employees in the U.S. to $11 and expanding maternity and parental leave benefits.
These financial perks for staff have been well-documented in the news, as Americans are eager to learn about the real financial impact of the new plan, which cuts the corporate tax rate from 35 percent to 21 percent. Equally prominent is that employers that have been quick to share cash rewards with employees have been, in more cases, inclined to do so via bonuses rather than raises.
So how does the practice of extending bonuses work as a recruitment tool, and what do job seekers think of it? Will this measure help businesses when it comes to recruitment?
The Case for Raises
In her Washington Post piece, Jena McGregor notes: “A number of companies, including Walmart and many banks, have announced increases to their minimum wage or other adjustments to salaries. But the number of companies offering bonuses — or who say they may do so — are, thus far, higher.”
While the revised tax plan is still in its infancy, questions abound: notably, why have so many businesses been quick to offer bonuses rather than raises?
More than half of Americans did not earn raises in 2017, as Daniel B. Kline points out. Kline writes: “Even though unemployment sits near historic lows, many workers have not seen any benefit from the strong job market. In fact, more than half of all American workers (52 percent) did not get a raise over the past 12 months, according to a new survey from Bankrate.”
Kline notes that among the Americans who did earn raises last year, many did so by getting promoted by their current employer or by pursuing employment with a new company.
Kline further notes that a pervasive anxiety about the job market may be what’s keeping employees ensconced in roles where their pay has stagnated: “If employees won’t quit their jobs when they don’t get raises (or at least be willing to), it removes the incentive for companies to pay workers more. But workers may not hold the lack of a raise against their company for the same reason they aren’t willing to leave their job, despite the market being healthy — they’re nervous about the economy’s ongoing prospects.”
Could offering bonuses to staff dislodge their concern?
[Related: Glassdoor’s Guide to Salary Conversations]
Perhaps extending immediate bonuses builds morale and infuses a boost of confidence among employees and prospective employees about the health of the company and employees’ role in its future. But this only works if the company has indicators of its health, and in some cases, a more complex scenario is playing out.
Walmart is one example of an employer that both extended bonuses and laid off staff. Lauren Thomas and Lauren Hirsch, writing for CNBC report: “the new tax law actually means that corporations could pocket more savings by laying off workers in 2018 than they could in 2017. It also makes it cheaper to buy labor-replacing machinery than in 2017.”
The new law incorporates complex factors in a changing and competitive marketplace, and real data is simply not in about the plan’s long-term impact, especially for businesses like those in the retail sector who are already confronting challenges.
What Job Seekers Value
In the weeks after the new bill was implemented, companies that extended financial bonuses to staff made the news. Businesses were eager to show their appreciation, both to their staff and to government leaders, for adopting a tax bill that champions businesses.
But what Kline’s research demonstrates is that job seekers have remained spooked even during a strong job market. While bonuses are a positive infusion, they don’t offer the same assurance and investment in employees that a raise or an enhancement to a benefits package would.
James Parker, Glassdoor’s Employee Recruiting Manager explains, “$1000 doesn’t buy you workplace happiness, career development opportunities, work/life balance or an inspirational manager. If companies were to pour added cash into employee benefits and improve existing benefits or add new benefits, I could see that having more of a sustained impact on recruiting.”
The real incentives that draw employees to an organization are beyond financial. They give employees a sense of fit and security in their roles. Parker adds: “I don’t think this will make a big impact on the recruiting front when candidates are evaluating higher-level opportunities. Especially if this is a one-off, situationally-based occurrence and not a new company norm.”
Parker further explains: “bonuses may help with short-term employee retention across more junior roles, but will most likely not affect somebody looking to change companies for reasons that carry more personal or professional value.”