Walmart, the world’s largest private employer, announced on Thursday that it was raising its starting hourly wage from $9 to $11 per hour, introducing a more generous parental leave policy, and offering one-time cash bonuses based on length of service for its US workforce. CEO Doug McMillon revealed the changes in a note to employees:
[W]e’re raising our starting wage to $11 an hour for Walmart U.S., Sam’s Club, Supply Chain, eCommerce and Home Office hourly associates effective in February. We’re also providing a one-time bonus to hourly associates that pays a larger amount the longer you’ve been with our company. Associates that don’t benefit from the new starting wage increase are eligible for the bonus and it will range from $200 to $1,000 depending on your length of service. …
I’m also excited to tell you that we’re making an important change to benefits by expanding our paid leave policy to provide full-time hourly associates with 10 weeks of paid maternity leave and six weeks of paid parental leave. This expanded parental leave also applies to salaried associates and to parents who adopt. We will also contribute $5,000 to the cost of adoption.
McMillon cited the corporate tax cut passed by the US Congress in December as part of what prompted the company’s decision. Several other major US employers, including AT&T, Wells Fargo, and Boeing, have also announced plans to invest part of their tax savings in raises or bonuses, though most companies have said these savings will mainly be spent on debt repayment, dividends, and stock buybacks.
The “Tax Cuts and Jobs Act” passed by the US Congress last month, which lowered taxes on corporate profits and most employees’ salaries, has a number of implications for employers, affecting payroll withholding as well as the tax treatment of executive pay and some employee benefits. One of the arguments the Trump administration and Congressional Republicans advanced for the tax cuts, which were historically unpopular among the American public, was that lowering the corporate tax rate would incentivize companies to use their tax savings to invest in their workforce, giving millions of employees a much-needed raise.
While several large employers announced plans to issue bonuses to employees, raise wages, or make other business investments after the tax reform bill was passed, most companies have indicated in earnings calls and surveys that they plan to parlay most of their tax cuts into debt repayment, dividends, and stock buybacks. Corporate America, Solutionomics founder Chris Macke argued in an op-ed at the Hill in December, was already sitting on large piles of cash and not prioritizing business investment due to insufficient demand. Companies, he wrote, need more customers more than they need more cash.
Whether or not US companies decide to invest more of their tax savings in growing their business (which they may still face public pressure to do), Bloomberg’s Rebecca Greenfield notes that these investments probably won’t come in the form of across-the-board raises. For most workers, the 3 percent annual raise, which has been standard for five years, will likely remain the norm in 2018:
The number of companies handing out holiday bonuses has taken a dive this year, Stephen Miller reports at SHRM, citing a new report:
The latest annual Holiday Bonus and Hiring Survey by Accounting Principals, a nationwide staffing firm for finance professionals, polled more than 500 HR or hiring managers across a range of industries about their holiday rewards. The survey, conducted from Aug. 25 through Sept. 6, showed that for the 2017 holiday season:
- 63 percent of companies plan to give their employees a monetary holiday bonus—smaller amounts may be put on a gift card—which is down from 75 percent in 2016.
- Those receiving a holiday bonus will see the average dollar amount rise by 66 percent to $1,797, up from $1,081 in 2016. The average holiday bonus in 2015 was $858.
- 38 percent of companies are giving donations to charities selected by employees in lieu of an end-of-year bonus.
This is a notable reversal from last year’s trend, when the percentage of companies giving out monetary holiday bonuses grew from 67 to 75 percent and the growth in dollar amount was more modest. Miller interprets this year’s change as reflecting the impact of more companies shifting to variable pay plans, in which bonuses are based on individual as well as organizational performance and are usually paid out in the first quarter of the year rather than in December.
Recent surveys of US organizations on their 2018 salary budgets show that more of them are moving toward an increasingly differentiated compensation strategy, with high performers getting rewarded with variable incentive pay and bonuses, while average and low performers receive smaller annual raises, or sometimes none at all. Employers like these more targeted pay schemes because research, including our work at CEB (now Gartner) shows that they tend to be more effective at motivating performance than routine raises for everyone.
The other reason for the increasing popularity of variable pay is that it gives employers more flexibility in their compensation budgets from year to year. It is practically impossible to take back across-the-board raises, or decline to give them when employees have come to expect them each year, without incurring a huge hit to employee morale. Variable raises and particularly bonuses tied to individual performance are more malleable: Giving an employee a substantial bonus for the great work they did this year this does not obligate you to give them that bonus again next year.
While beneficial to employers, and arguably good news for top performers, this change does have a downside for employees, making their incomes less predictable and leaving them more vulnerable to macroeconomic shifts. The other challenge here is that focusing raises exclusively on top performers can leave less room to differentiate rewards between average and low performers. As our own Brian Kropp tells NBC News’s Martha C. White, this carries its own set of risks for employee engagement:
The latest salary planning survey from Aon Hewitt finds that most US organizations plan to keep wages relatively flat for most employees in 2018, with base pay increases averaging 3 percent and spending on bonuses and other variable pay declining to 12.5 percent of salary budgets, the lowest since 2013.
“The economic outlook for most industries continues to improve with increased demand for goods and services and stronger job creation, but companies remain under pressure to increase productivity and minimize costs,” Ken Abosch, broad-based compensation leader at Aon, said in a press release. “As a result, we continue to see relatively flat salary increase budgets across employee groups, with most organizations continuing to tie the majority of their compensation budgets to pay incentives that reward for performance and business results.”
Two-thirds of organizations are increasing the differentiation of their merit pay in 2018, Aon finds. Among those employers, 40 percent are reducing or even eliminating raises for low performers, 18 percent are using a more highly leveraged merit increase grid, and 15 percent are setting more aggressive performance targets.
Surveys of salary budget projections for 2018 show that US employers are planning to hand out raises of 3 percent on average, similar to the previous few years. The latest survey from Willis Towers Watson concurs in this regard, Bloomberg’s Rebecca Greenfield reports, finding that 98 percent of employers plan to raise salaries this year, with most employees getting a raise of around 3 percent. However, WTW also found that top performers are getting a bit more than the rest:
Employers are cautious about giving raises, and even as some complain of trouble hiring as the job market tightens, few feel pressure to pay their employees more, said Sandra McLellan, a researcher at Willis Towers Watson. A sliver of employees will, however, see a bigger bump on their pay stubs this year. So-called star performers, those who score highest in performance ratings, can expect, on average, a 4.5 percent salary bump.
Benny Marty / Shutterstock.com
Yahoo’s board decided to rescind CEO Marissa Mayer’s cash bonus for 2016, the company revealed in a US Securities and Exchange Commission filing on Thursday, after an investigation into a 2014 security breach that compromised hundreds of millions of user accounts found that her executive team did not respond appropriately to the incident:
While significant additional security measures were implemented in response to those incidents, it appears certain senior executives did not properly comprehend or investigate, and therefore failed to act sufficiently upon, the full extent of knowledge known internally by the Company’s information security team. …
In response to the Independent Committee’s findings related to the 2014 Security Incident, the Board determined not to award to the Chief Executive Officer a cash bonus for 2016 that was otherwise expected to be paid to her. In addition, in discussions with the Board, the Chief Executive Officer offered to forgo any 2017 annual equity award given that the 2014 Security Incident occurred during her tenure and the Board accepted her offer.
In a brief post on Tumblr addressing the news, Mayer encouraged the board to redistribute her bonus among Yahoo’s workforce, but as the Washington Post’s Jena McGregor points out, that doesn’t necessarily mean they will: