Some US Companies Are Investing Tax Savings in Learning and Development

Some US Companies Are Investing Tax Savings in Learning and Development

In the wake of the Tax Cuts and Jobs Act passed by the US Congress in December, which slashed the corporate tax rate from 35 percent to 21 percent, some large employers announced that they were raising pay, expanding benefits, or (most commonly) issuing one-time bonuses for their employees with the billions of dollars in savings they would gain from the tax reform package. Critics of these tax cut bonuses say they are a cynical attempt to curry favor with the Trump administration and mask the fact that investors are reaping the lion’s share of the rewards. Most of the windfall is being passed on to shareholders through dividends and stock buybacks, as the Wall Street Journal noted in a recent article noting the impact of the tax cuts on corporate earnings in the first quarter.

Some companies are investing their tax cuts in in employees in a different way. The aerospace manufacturer Boeing, for example, announced in December that it was investing $300 million of its tax savings in employee programs, one third of which would go toward learning and development (its total savings from the tax cuts are expected to be around $400 million a year, the Seattle Times reported in January).

In fact, many organizations are putting part of their tax savings toward learning: Our pulse survey on tax reform at CEB, now Gartner, found that among organizations allotting part of their tax savings to HR, 39 percent were investing in employee training, development, and education—the second most common target for these allotments after pay and benefits. (CEB Total Rewards Leadership Council members can see the full results of that survey here.)

Boeing’s L&D investment will start this year and extend over multiple years to come, Bethany Tate Cornell, vice president of leadership, learning, and organizational capability at Boeing, told Genevieve Douglas at Bloomberg Law late last month. The company began developing its new training programs based on a survey that gauged employees’ needs and interests, which found that 39 percent wanted better technical development and 29 percent wanted new skills for jobs affected by new technology.

These concerns over technical and digital skills in the face of technological change squares with what we already know about the increasingly digital focus of L&D in terms of both what skills to focus on and how to deliver them. We’ve also seen a number of large employers roll out major new training and education initiatives in the first few months of 2018.

While tax reform has played a role in these decisions to some extent, as with growing wages and benefits, the primary driver here is probably the state of the labor market. With many organizations struggling to fill job openings, employees have the leverage to demand more of their employers, and one of the things employees want is more investment in their education, training, and career development. Employers that have invested in this area have found it a cost-effective way to attract and retain talent, which in today’s tight labor market is an increasingly vital business concern.