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:
Employee monitoring technology is often depicted as “Big Brother” watching over employees to enforce maximum productivity. However, as these technologies become more common, organizations are finding opportunities to use them in ways that benefit employer and employee alike. TechCrunch’s Steve O’Hear reports on one London startup, Zego, which has devised a way for delivery workers on gig economy platforms to insure their vehicles at an affordable rate by charging them only for those hours when they are logged into the platforms they use to find work:
The startup has also developed good relationships with the platforms it supports, meaning its insurance app is able to connect to those on-demand food delivery platforms so that Zego-insured drivers don’t need to manually tell Zego when they are and aren’t working. Instead, the cover kicks in as soon as they log on for a delivery shift.
And because Zego knows when a person is or isn’t out driving and where, it is potentially able to use this data to adjust its risk assessment accordingly. The startup is also exploring telematics — the use of tracking hardware and software — as another way of more accurately pricing its pay-as-you-go cover or helping to reduce risk by perhaps warning drivers when they are being unsafe.
Zego’s product responds to a demand for ways to give workers in the UK’s ever-expanding gig economy at least some of the benefits and protections enjoyed by full-time employees, in a flexible, portable form that fits with their work lives. It also collects a lot of data on its users, but Zego is betting that they will be perfectly happy to trade that data for reduced insurance costs. In fact, the pay-as-you-go insurance policy is one of their main branding points on their site. Because Zego is offering a value proposition where workers benefit from the collection of their data, they don’t mind the company knowing when and where they work.
Employers can benefit from a similar approach when implementing employee monitoring technologies or otherwise collecting employee data. Research we at CEB, now Gartner, conducted last year found that most employees don’t consider it unacceptable for their employers to monitor their activity at work. Among millennials, 70 percent don’t mind being monitored as long as the purpose of the monitoring is to help improve their performance. Our findings suggest that employees are less resistant to these new forms of monitoring than employers may think, but also that they are even less likely to object when they see a direct benefit.
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.
The overwhelming majority of companies use individual, revenue-based incentive plans as part of their compensation package for front-line sales staff. For as long as there have been salespeople, commission served as the perfect motivational lever which kept them productive and happy—it could even make them quite rich if they got good enough at it. But now it’s time to re-evaluate this strategy given the recent changes in business-to-business buying behavior.
Strategic buyers are no longer dependent on salespeople for information on product and service offerings. In the information age, business leaders can consult review sites, online forums, social media, and professional networks to discover solutions for their needs. In fact, at CEB (now Gartner), our Sales and Marketing practice found that the typical B2B buyer is 57 percent of the way through their decision-making process before engaging with a supplier. The cold call isn’t dead, but it is no longer the most prudent way to introduce your product to potential customers.
As such, it has become harder to measure the value a salesperson has provided after a purchase is made. Previously, companies would arm their field teams with standard marketing materials and wait for the money to come in. Sales reps would cultivate leads, provide potential customers with all of the relevant information, and convert some of those opportunities into deals. The salesperson’s contribution was very clear: They were revenue generators. Today, now that customers wait until they know exactly what they want and how much they want to pay for it before reaching out to salespeople, B2B providers are getting their name out through some combination of PR, content marketing, social media, white papers, and the like. The best companies are doing it in a way that draws prospective customers into the funnel, recognizing the need for more institutional support in the sales and lead generation process.
The online mattress manufacturer Casper is one of many companies experimenting with new ways to encourage employees to live healthier lives, in this case by monitoring their exercise and sleep habits and rewarding those who work out and get to bed on time. Leah Fessler profiles the company’s wellness incentive program at Quartz:
Casper co-founder Neil Parikh explains that employees track their exercise and sleep via IncentFit, a fitness-reward app designed for company use. They use the app to “check in” at their desired gym or fitness facility. (Location-based algorithms ensure that you really are at SoulCycle, not on your couch.) IncentFit also rewards running, walking, or biking milage tracked via fitness apps or devices like Fitbit.
Payment is distributed monthly: $20 per fitness facility/class visit, $0.20 per mile walked, $4 per mile ran, $2 per mile biked, and $50 per race completed. The startup has also extended the benefit to rest, encouraging employees to track nightly sleep via IncentFit for $2 per night. Through IncentFit, Casper employees can earn a monthly maximum of $130 for exercise and $60 for sleep—a $190 cap set by Casper’s leadership.
“[A]s an employee, I’d be very nervous about this benefit, particularly who has access to sensitive exercise and sleep data,” organizational psychologist Liane Davey tells Fessler:
Equilar’s 2017 CEO Pay Trends report shows that the compensation packages of CEOs at the US’s 500 largest public companies rose by 6.1 percent in 2016 to a median of $11 million, representing the largest increase at the top of the payroll since 2013:
“Median CEO pay packages consistently climbed each year over the five-year study period examined for this report,” said Matthew Goforth, Equilar Research Manager and lead author of the report. “At the same time, boards continue to tweak incentive pay to align CEO interests with both company strategy and shareholder returns over the long term.”
During the study period, a growing number of companies began granting performance-based long-term incentives (LTI) to their chief executives, reaching 81.5% of Equilar 500 companies in 2016. Meanwhile, the Equilar report found that the prevalence of CEOs receiving time-based stock options fell to a low of 50.0% in 2016.