The outcome of Tuesday’s presidential election in the US is the latest in a series of recent changes in the political sphere with significant implications for the business world. Like Brexit in the UK, the victory of Donald Trump was not widely anticipated and will have major consequences in terms of changes to federal labor and employment policy, and as with Brexit, there’s a tremendous amount of uncertainty about exactly what those changes will be.
The coming weeks and months will bring more clarity on the policy intentions of the Trump administration and the likelihood of particular changes coming to pass.
Regardless of the political landscape, talent is the key differentiator of organizational performance today. HR executives have a responsibility, right now, to steer their organizations through this uncertainty by:
- Partnering with their CEO to determine how a Trump administration impacts their talent strategies,
- Providing support to segments of their workforce that will have been disaffected with the election to maintain their engagement, and
- Enabling their leaders to navigate through the uncertainty to ensure their organization continues to drive to productive outcomes.
Conversations HR leaders Should Have With Their CEO
It is highly likely that there will be changes to the ACA; the question is how much? At one extreme the entire legislation could be dismantled, at the other end there might be small adjustments, e.g. allowing insurance companies to sell policies across state lines. Any changes here will likely generate cost implications, positive or negative, for the benefits expenses that employers have. For companies that have placed employees on the health care exchanges, the cost implications here could be significant. HR executives need to follow the debate that will occur here to determine how and what benefits they will provide to their employees.
Repealing the ACA altogether will be a major legislative undertaking. Kathryn Moody at HR Dive calls that outcome unlikely, but says four other R’s are possible: Republicans will likely retain the parts of the law that are most effective or popular, such as the prohibition on excluding patients with pre-existing conditions, remove elements like the excise or “Cadillac” tax on high-value health care plans, replace provisions about what benefits packages must be offered on the exchanges, and reduce the law’s individual and employer mandates, which advocates of the ACA say are essential to making its health insurance markets work.
In the days following the election, Trump appeared to soften his stance on the ACA, suggesting after a meeting with President Barack Obama that he would keep popular provisions of the law, including those that bar insurers from denying coverage based on pre-existing conditions and allow young adults who live at home to receive insurance through their parents until age 26. The proposal published on Trump’s transition website, however, suggests that his administration favors a different approach to pre-existing conditions and would create state-run high-risk pools to provide coverage “for individuals who have significant medical expenses and who have not maintained continuous coverage.”
Other elements of the law, particularly those that have proven unpopular with the public, are likely to change dramatically or be completely overturned. The individual and employer mandates to purchase health insurance are likely targets for repeal, as are the restrictions on insurers offering high-deductible plans or “skinny” plans that cover only a limited range of expenses. Trump and Congressional Republicans have said they want to enable more consumer choice in the health insurance market, partly by removing these restrictions and also by enabling insurance companies to sell policies across state lines.
Most observers believe the “Cadillac tax”—as the ACA’s 40 percent excise tax on high-value health insurance plans is commonly called—is particularly likely to be cancelled before taking effect in 2018. Repeal of this tax was already supported by both Democrats and Republicans and was likely to happen regardless of the results of this year’s elections. On the other hand, the tax treatment of employer-sponsored health care plans may change in other, unpredictable ways.
The Republican health reform plan also focuses on expanding the use of health savings accounts (HSAs), flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs), in an attempt to make health benefits more flexible and portable and to encourage individuals to save up for their own health care expenses. As we’ve discussed before, these instruments can be very effective savings vehicles, but many employees, particularly those with low incomes, may not know how to get the most out of them. Employers may see more government incentives for health plans that include HSAs or FSAs, but should recognize that a shift toward this type of plan may require a different approach to educating employees about their benefits.
The new administration may also have an impact on the rules the Equal Employment Opportunity Commission established this year as part of the ACA, governing what incentives organizations can use to get employees to participate in wellness programs. Under the rules, which come into effect at the start of the coming year, the incentives or discounts an employee receives for participating in a wellness program that asks questions about their health or includes medical examinations cannot exceed 30 percent of the cost of that employee’s individual health coverage. The question of whether employers can make participation in group health coverage conditional on sharing their health information as part of a wellness program is not settled; a few courts have ruled in favor of allowing such conditions, but the EEOC has opposed them. The new administration may be more amenable to letting employers use both “carrots” and “sticks” to incent wellness program participation.
Republican control of the US government may also spell major changes to the state-run programs Medicare and Medicaid, both of which Republican leaders have said they want to reform significantly to make them less expensive, such as by giving states block grants for Medicaid or shifting some Medicare beneficiaries from direct health insurance coverage through the government to private coverage with government-provided premium support. Any such changes could have consequences for organizations that employ significant numbers of low-income individuals and current or soon-to-be senior citizens.
How campaign rhetoric translates into policy is often unclear, but given Trump’s stated positions on immigration, we are likely to see increases in restriction, which may take the form of limiting the number of immigrants from specific countries, issuing fewer H1-B visas for skilled workers, and/or enacting a mandatory e-verify system. HR executives should examine their workforces and talent strategies to see how dependent they are on talent that falls into these categories and engage in workforce planning activities to identify alternative talent pools to help meet this need.
Rob Moss at Personnel Today, a UK publication, reports that employment lawyers are advising companies to “wait and see,” as the details of an immigration reform policy will depend on Congress:
Christi Jackson, attorney and head of the US Practice at Laura Devine Solicitors, corporate immigration specialists, said: “It is not clear whether the more extreme aspects of Donald Trump’s anti-immigration rhetoric will translate into policy and practice.”
“His main focus will be on undocumented workers, and the ability to move skilled labour to work in US firms is unlikely to be completely stopped. However, it is clear that the task facing firms needing to relocate staff to the US is not going to get any easier. Unlike the UK government, which professes to want to maintain free trade despite a desire to reduce immigration, Donald Trump has no such qualms about restraining trade. Firms operating across the Atlantic will need to keep a close eye on what the new administration does – and be prepared for workforce planning involving US sites becoming a whole lot harder.”
At the CIPD’s People Management blog, Jackson further considers what Trump will mean for talent mobility, particularly between the UK and US:
Trump’s promise to ban all Muslims (later toned down to an ‘extreme vetting’ process and suspension of immigration from terror-prone countries) could have an immediate effect on British employees travelling to the US as visitors or transferring to there for temporary employment. The UK’s 2011 Census lists Islam as the second-largest religion in the UK, with more than 2.7 million Muslims living in the country. While it is unclear how exactly Trump’s administration will implement this vetting of travellers, the possibility of a ban based on religion is real and British travellers could most certainly be affected.
Trump’s vow to “put American workers first” is a clear indicator that the importation of foreign talent, whether skilled or unskilled, will not be made a priority under his administration. He has made comments in the past regarding his dislike of the H-1B visa programme, and is a strong advocate against free trade. Put simply, if Trump makes it harder to trade with foreign countries and hire foreign workers, US businesses, and in turn their employees, will feel the effects. Global mobility professionals should plan employee travel and relocation well in advance, and stay apprised of proposed changes to US immigration law to ensure their staffing needs are addressed with potential legislation in mind.
US companies with a foreign presence may see an increase in their employees’ demands to move away from the madness of the US political climate, which could lead to an increased demand for UK organisations to hire foreign workers. With immigration and the hiring of foreign staff a key issue in both countries, it seems a competition could ensue.
Motherboard editor Kate Lunau warns that a Trump presidency raises the “very real possibility that the US could face a brain drain as some of its top science and tech talent moves to greener pastures”—a situation Canadian employers seem happy to take advantage of:
Canada just made it easier for skilled immigrants to come here to work. The federal government recently announced new measures that will help lure top tech talent. Canada stands to benefit from more skilled immigrants under a Trump regime, confirmed a note published by a strategist with RBC Capital Markets in September. That’s because the US would be “potentially viewed as less hospitable to immigrants overall,” the note says.
Some Canadian startups are looking forward to recruiting from the US. “It’s been a giant pain in the ass to bring in foreign talent,” said Christopher Reid, the CEO of Sortable, a startup based in Waterloo, Ont. that uses machine learning to optimize digital ads.
On the night of the election, the job search site Indeed.com registered a spike in US users searching for jobs in Canada.
Trump has pledged to overturn several regulations created by the Obama administration, through either executive orders issued by the president or rule changes made by federal agencies. Other Obama-era regulations may be changed or cancelled by Republicans in Congress once the threat of a presidential veto is off the table, or overturned in court when the Trump administration declines to defend them against legal challenges. Many regulations that affect employers directly are among those that may change in the next year, the effects of which include:
- Doubling the salary threshold for the white-collar exemption from overtime pay requirements
- Requiring companies to submit summary pay data to the Equal Employment Opportunity Commission each year showing what employees of each gender, race, and ethnicity earn
- Requiring companies to publicly disclose the ratio of the compensation of their CEO to that of the median employee
- Applying a “fiduciary standard” to anyone who provides retirement investment advice to plans, plan fiduciaries and IRAs
- Mandating that employers disclose any relationship with consultants hired to discourage employees from forming or supporting unions
- Requiring federal contractors to disclose any recent violations of employment laws to and blocking even unproven violators from contracting with the government
- Requiring federal contractors and subcontractors to provide paid sick leave
- Protecting LGBT employees of federal contractors against discrimination on the basis of their identity
- Preventing employers of tipped workers from forming certain kinds of tip pools
- Encouraging states to set up auto-IRA programs, which mandate that employers who don’t offer a retirement savings plan automatically enroll employees in an IRA
(See here for more details on how and why these rules may change.)
Donald Trump has indicated that he believes states should set their own minimum wages and compensation laws, rather than set these policies at the federal level, and many states did so in this election: Maine, Colorado, Arizona, and Washington all passed referenda on Tuesday increasing their minimum wage.
At the same time, there is a patchwork of rules around what can be asked, or not, about compensation during an interview, particularly regarding candidates’ salary histories. Opponents argue that such inquiries disadvantage women and minorities, contributing to gender and racial pay gaps. In August, Massachusetts passed a law barring employers from asking about salary history, which some observers saw as a decision other states would emulate: Indeed, California is considering legislation adding a salary history ban to its fair pay law, and New York City just enacted a similar ban for government employees. A Trump presidency, a Republican Congress, and Republican wins in several governors’ races may spell the end of this trend. In any case, there is zero chance that a House bill proposing a federal ban on this practice will become law in the next two years.
This increase in variability will cause organizations to either create different rules in different locations that they operate, and to manage that complexity, or standardize around the highest wage rates and rules that might increase cost but create consistency. HR executives will need to determine the right trade-off between managing increased variability and standardization on compensation management.
The US is one of the only countries in the world that does not legally require employers to provide paid parental leave, and the question of whether to introduce such a law was a significant issue in the presidential campaign. As SHRM’s Lisa Petrillo explains, Trump has expressed support for a federal law guaranteeing six weeks of maternity leave to mothers who have given birth, not adoptive parents or fathers. It is unclear whether this proposed rule would apply to single mothers or same-sex couples.
States and cities have acted on their own in this regard, however, with California, New Jersey, Rhode Island, and New York having enacted paid parental leave mandates of their own. Parental leave is also a policy issue on which large employers are leading the way by introducing benefits voluntarily in an effort to boost retention of mid-career women and develop more family-friendly cultures. Businesses, not governments, may ultimately be the ones to make parental leave mainstream in the US.
While globalization and free trade have certainly caused some job losses among blue-collar manufacturing employees, most economists believe that the bigger driver of job loss in the US manufacturing sector is technology and automation. Even with significant trade and immigration restrictions in place, it is highly unlikely that these jobs will return in the same form as the past. Given the importance of this segment to the Trump coalition, his administration will likely provide training support, grants, or other policy interventions to help re-skill this group to build the capabilities that they need to compete in the modern economy. For organizations that have a significant blue-collar talent segment, there may be opportunities to partner with a Trump administration for resources and support.
Understand that elections are personal to many of your employees, this one perhaps more than most, and emotions among your staff will run the gamut from elation to depression.
Keep Employees Focused and Productive
Employees will need to process results and debrief, but the combination of a surprising outcome and related uncertainty, could be enemies of productivity and impact.
Ensure Political Disagreements or Preferences Don’t Erupt or Distract
One leader told us: “It’s worth remembering that the point of a close election is that pretty much half the world voted the way you didn’t. It is an amazing mark of a healthy democracy that we do this every four years and go right back to work, school, church, wherever, with a whole lot of people who think differently than we do.”
Continue on Your Diversity & Inclusion Strategy
80 percent of CHROs list increasing diversity and inclusion in the workforce as a priority for 2017. Though making the case for diversity can be a challenge when your workforce is feeling divided outside of the office, mounting research shows diverse teams and inclusive cultures grow businesses, increase innovation, and improve your employer brand. Stay the course on D&I.
For a look at the other Election Day results that will impact business and HR in various states across the country, go here.
For our ongoing coverage of what the Trump administration may mean for HR, head here. Did we miss something? Let us know. You can also follow CEB Talent Daily on Twitter, subscribe to our newsletter, or share this explainer: