Tax reform, tight labor market bust open the lid on benefits
Of all the challenges employers are facing, talent acquisition and retention are at the top of the list.
That’s why companies such as Chipotle Mexican Grill and Lowe’s, with their emphasis on education and training, and Walmart and State Street Corporation, with their adoption benefits, are enriching perks in an effort to keep and attract talent.
The push is being driven by low unemployment, which the U.S. Bureau of Labor Statistics reports is around 4.1%, and employee expectations within the past year.
Granted, wages draw in talent and are starting to tick up to 2% to 3%, says Diane Lim, principal economist at The Conference Board, but companies feel pressured to keep salary increases in check.
Slow productivity growth, automation, changing profit models and pressure from stockholders for profits are among the reasons companies do not — or cannot — raise wages.
Rather, employers are using their benefits packages to give job seekers a better sense of what makes their company unique while also retaining current employees, she says.
“Companies don’t just want to compete on wages. The benefit of competing with benefits is that you get greater buy-in and loyalty to your company because benefits are wrapped up in the company’s culture. It’s not just a monetary benefit — something you can put a dollar value on — it’s something that is part of what benefit leaders call the value proposition,” Lim says. “By presenting compensation through a benefits package, it’s a little bit more nuanced and detailed and something that can attract a particular type of worker who’s going to be a more productive worker, and a more loyal worker, for your company in the long term.”
Not only are employers boosting bonuses and retirement plans, but they’re also coming up with new and innovative benefits to retain employees and lure workers away from competitors.
In fact, benefits like pet insurance, critical illness insurance, ID theft insurance and a comprehensive student loan aid program have not only grown more popular among employers, but also have transitioned from voluntary to employer sponsored, says Amy Hollis, national leader of voluntary benefits at Willis Towers Watson.
Within the past four months, companies including MetLife and financial services firm Baird changed their legal services and identity theft protection benefit, respectively, from voluntary to employer-paid.
That trend, along with sweeping tax reform ushered in by President Donald Trump and the GOP in December, has created a climate where companies are becoming increasingly strategic and creative about the benefits they offer.
Under the new corporate rate, which taxes companies 21%, down from 35%, employers have taken to their intranets and social media accounts in droves to announce the ways they are reinvesting those savings, from one-time bonuses to benefits enhancements and new job training.
What follows is a look at 10 companies offering substantially enhanced, new or innovative benefits.
AutoNation introduced an employer-paid cancer benefit for employees, spouses and children up to age 26 as a result of the expected $70 million to $100 million annual benefit it expects from the tax reform law.
The benefit, which was purchased through MetLife and includes a cash payment up to $5,000 for cancer diagnoses, with no limitations on how the money is spent, will apply to AutoNation employees starting on their first day of employment. It went into effect on Feb. 1.
AutoNation’s cancer benefit is unique because only a small number of employer-sponsored cancer and critical illness insurance plans are fully paid by the employer.
In 2017, MetLife had more than 1,500 employer-sponsored cancer and critical illness plans and fewer than 5% were employer-paid, the carrier says.
Chipotle Mexican Grill
The Denver-based fast food chain is doubling down on its education benefits with an accelerated training program.
Prior to the Tax Cuts and Jobs Act, the company offered $5,250 in tuition reimbursement and reduced-cost courses and degree programs at a number of colleges and universities through Guild Education.
With the anticipated savings from tax law, Chipotle will additionally give employees access to an accelerated training program, which will be conducted internally in both the restaurant space and in a classroom at the company’s Denver headquarters, says Mike Ferguson, director of people support at Chipotle.
“The aim of this program is to better equip our restaurant and staff teams for success in all they have to do,” he says.
The Society for Human Resource Management found that companies with training benefits and upskilling opportunities are more likely to retain employees than those that do not.
“Organizations aiming to attract younger generations may want to enhance career development and advancement opportunities because these benefits are more important to millennials, who are earlier in their careers, than to older generations,” according to SHRM’s 2017 employee benefits survey.
In addition to the accelerated training program, more than 71,000 employees will be eligible for cash and stock bonuses, paid parental leave, life insurance and short-term disability, according to Chipotle.
CVS Health is expanding its benefits suite amid tax reform to include paid parental leave to full-time employees. It also will maintain employee premium rates.
The drugstore retailer, which has 240,000 employees across the country, will offer four weeks of fully paid parental leave to hourly and salaried full-time employees, regardless of gender.
Previously, women received partially paid leave while men received unpaid parental leave, according to the company.
CVS Health also will keep employee premiums at the same rate for the 2018-19 plan year and will absorb any additional costs for the 100,000 workers enrolled in the company-sponsored health plan.
The company says its medical and prescription costs increased by 5% year-over-year. More than 50% of the prescriptions filled by CVS employees and their family members are available at zero copay.
Estée Lauder Companies
Beauty empire Estée Lauder Companies added a student loan repayment contribution to its benefits package in September 2017 to better capture the needs of its millennial-heavy workforce.
The New York City-based conglomerate, which owns brands such as Clinique, MAC Cosmetics and Origins, partnered with student loan payback platform Tuition.io to administer a monthly $100 contribution to an employee’s student loans. The contribution caps at $10,000.
“[We] want to help people where they are in their lives,” says Latricia Parker, executive director of global benefits for Estée Lauder. “Those who have student debt, they value it tremendously.”
Estée Lauder joins the 4% of employers that offer company-provided student loan repayment benefits,
including PwC, Fidelity and Aetna. Parker notes that the company is one of the only luxury brands to offer the benefit.
Thanks to tax reform, more companies are beginning to inquire about how they can reinvest their tax savings into student loan repayment benefits, says Jane Kwon, total rewards practice leader at Aon.
“With tax reform, we’re putting some bets that that number [of employers offering student loan benefits] will double,” she says.
Kwon says that most companies interested in offering a student loan repayment benefit want to dole out monthly contributions over a five-year period, which can help with retention rates.
The decision to add a student loan repayment program to the company’s benefits package occurred before the passage of the Tax Cuts and Jobs Act, Parker says.
The company will continue to look at how the new tax savings can be funneled back into the workplace, she says.
Hostess Brands isn’t the first employer to dole out new employee benefits in wake of tax reform — but its offer may be the sweetest. The bakery company, which is known for its Twinkies and Ding Dongs, will offer employees a year’s supply of Hostess products, along with $750 cash bonuses and $500 toward 401(k) contributions.
The free snacks will vary; Hostess says it will select a “product of the week” that it will give to each employee in a multi-pack.
“Adding the product piece was a fun way to bring all of our facilities together,” says Matt Hall, Hostess’ vice president of human resources. “We do not make everything in every plant, so having the opportunity to provide new and different products for folks to try seemed to be the right direction to go. We hope to continue building passion around our company.”
Although many retailers, including Macy’s and REI, offer employees a discount on the company’s merchandise, few companies hand out free products.
The home improvement retailer has made three significant benefit and training announcements in the past few months, and the company has hinted that there are more to come.
Lowe’s has expanded its concierge service benefit with Accolade to help employees through healthcare benefits navigation, enhanced its maternity and paid parental leave policies, offered $5,000 in reimbursement for adoption assistance and rolled out a new workforce development benefit with Guild Education to help its workers pursue a skilled trade like carpentry or plumbing.
The company’s investment in strategic partnerships with Accolade and Guild Education to enhance its employee benefits is likely to yield better utilization rates.
Likewise, the three major changes to the company’s benefits indicate that Lowe’s understands its workforce, the majority of whom are hourly workers.
Insurance giant MetLife is using part of its $1.2 billion tax savings from the fourth quarter of the 2017 fiscal year to boost employee retirement plans.
The company will increase the minimum contribution to its defined benefit pension plan, auto-enroll its 401(k) plan participants and offer employer-paid legal services. MetLife says the changes were accelerated due to the Tax Cuts and Jobs Act. All full-time, salaried employees in the United States will be eligible for the newly enhanced benefits.
“When you look at the overall focus of what we did, we took the time to step back and reflect on who we are as a company. We started with our values,” says Susan Podlogar, the company’s executive vice president and chief human resources officer. “We’re focusing on the long term [and] preparing for the future. We really opted to invest in the long term rather than one-time bonuses.”
More than 7,000 U.S. employees will see a 5% benefit to the cash balance formula of MetLife’s defined benefit pension plan, as the company set a minimum credit to $300 per month. Previously, the company did not have a minimum credit.
Likewise, auto-enrollment and auto-escalation for the company’s 401(k) plan, along with immediate company-match eligibility and vesting, will take place at the beginning of 2019, says Andy Bernstein, vice president of MetLife’s global compensation and benefits department.
The level at which employees are auto-enrolled and whether auto-escalation will be offered and, if so, at what levels have yet to be finalized, he says.
For 7,000 of the company’s U.S. employees who earn less than $75,000 a year, they will see an increase in the amount of their group life insurance coverage as MetLife set the minimum amount of coverage at $75,000 a year.
MetLife previously offered all of its U.S. employees group life coverage in an amount equal to their annual pay.
MetLife also changed its legal services offering from voluntary to employer-paid, a move that experts say will become popular in 2018 and beyond.
State Street Corp.
In February, State Street added $40,000 worth of fertility benefits and increased adoption assistance for workers looking to start or expand their families.
The financial services firm consulted with its employees in an effort to make a meaningful expansion to its benefits package, which now includes four weeks of fully paid leave for employees who are primary caregivers to a child born via surrogacy; $20,000 in reimbursement for fertility-related expenses beyond the firm’s medical plans, such as surrogacy; and $20,000 in reimbursement for adoption assistance (up from its previous reimbursement of $5,000).
The company says the benefits can be used once per calendar year, and employees are allowed up to $40,000 in lifetime financial support for these benefits combined.
State Street’s push toward employer-offered fertility benefits is part of a growing industry trend, which consulting firm Willis Towers Watson expects to grow to 66% by 2019, up from 55% in 2017.
Likewise, credit card giant American Express increased its fertility coverage from $20,000 to $35,000 last year, as did social media platform Pinterest, which quadrupled its fertility coverage to $20,000 from $5,000.
Willis Towers Watson also partnered with two digital-first vendors, Ovia Health and Progyny, to add family and fertility benefits that educate employees on various stages of pregnancy and to walk workers through the planning, pregnancy and early child caring stages.
Financial services firm TIAA expanded its paid parental leave to 16 weeks, up from 12 weeks of partial paid leave, and broadened it to include secondary caregivers.
The policy became effective Jan. 1, giving all new parents at the New York-based firm — regardless of gender, who physically births the child or who the primary or secondary caregiver is — access to 16 weeks of paid leave.
“TIAA recognizes that in today’s times, there is such a prevalence of two working parents,” says Bob Weinman, vice president of benefits and HR operations at TIAA. “By acknowledging that primary and secondary caregivers are important in the equation, we’re setting a new standard for ourselves and the industry.”
The company expects 350 to 400 of its 12,000 eligible employees to use these benefits in any given year, he says.
“We routinely look at our total benefits package relative to what’s going on in the market and our competitors,” Weinman says. “There is a movement toward improving or increasing the amount of paid time that companies were providing to employees. This was the right time.”
Paid parental leave is on a five-year upward trend, with more employers each year adding paid maternity, paternity, adoption and parental leave, according to the Society for Human Resource Management. Unum is another one of those firms. New moms and dads employed at the insurance company will be eligible for six weeks of paid time off to care for a newborn, or a child placed through adoption or foster care, at any time during the 12 months following birth, adoption or fostering, the firm recently announced. Previously, Unum had no formal paid parental leave policy.
Between 20% and 30% of employers offer some form of the aforementioned leave policies, according to the report.
As the number of weeks in paid parental leave increases, traditional companies still struggle to provide those benefits, Aon’s Kwon says.
“A number of companies have been trying to keep up with it,” she says, noting the norm is somewhere between eight to 12 weeks of paid leave.
Walmart announced a slew of changes in January to its employee benefits package, including a new adoption benefit.
The adoption benefit, available to both full-time hourly and salaried associates, will total $5,000 per child and may be used for expenses such as adoption agency fees, translation fees and legal or court costs.
In a blog posted on the company’s website, Walmart’s president and CEO Doug McMillion explained he wanted the new benefits to address employees’ concerns over what they called a “limited” adoption policy.
“I recently heard from two associates on this topic — one through an open door note and one at a town hall,” he wrote. “Both pointed out how limited our policy was for adoptive parents, so we’re happy to be addressing that concern now. Families are a priority to us, and connecting with and caring for a new family member is obviously important.”
The retailer also expanded its U.S. leave policy to 10 weeks of paid maternity leave and six weeks of paid parental leave. Salaried associates also will receive six weeks of paid parental leave.
Previously, full-time hourly workers were eligible for up to eight weeks of paid maternity leave and two weeks of paid parental leave, while hourly workers received half pay during family leave.
The benefit also applies to parents who adopt, Walmart says. The changes will benefit more than 1 million employees.
With additional reporting by Kathryn Mayer.