After the passage of the Tax Cuts Act, employers across the United States, including several in Hawaii, announced plans to direct gains from a reduced corporate tax rate and other significant business tax cuts toward employee initiatives.  To better understand how Hawaii businesses will move forward in response to tax reform, HEC asked members to participate in a short survey last month.  The survey sought information on members’ plans regarding changes to employee compensation, benefits offerings, and other initiatives as a result of the tax reform legislation.

Specifically, survey participants were asked to identify, from the following list, those employee initiatives that they are planning in response to tax reform: 

• Increasing the rate of pay
• Offering of a one-time bonus
• Reducing the employees' share of the health care premium
• Reducing the employees' share of the dental premium
• Increasing of 401(k) / 403(b) matching contribution
• Delaying of termination / freezing of pension plans
• Increasing time-off benefits
• Increasing training and employee development budgets
• Increasing the budget for employee recognition and /or appreciation programs
• Increasing budget for corporate wellness programs
• Updating of equipment / technology
• Improvements to the workplace environment

 Of the more than five hundred organizations invited to participate in HEC’s survey, most organizations shared that they do not anticipate implementing any changes in these areas in response to tax reform.  Indeed, those Hawaii organizations that were reported in the media as having plans to provide employee bonuses and increase minimum wage rates, including American Savings Bank, Bank of Hawaii, Central Pacific Bank, and First Hawaiian Bank, represent the views of a minority of survey respondents.  That said, in addition to increasing minimum wage rates, the top three initiatives that respondents indicated an intent to explore in response to tax reform were (1) improving the workplace environment; (2) updating equipment/technology; and (3) increasing training and employee development budget.

 As to the possibility of increasing employee pay rates, one-fourth of survey respondents indicated that they do plan to implement a pay rate increase sometime in 2018, with plans for a continuing review of the organizations' overall compensation program.  While the required minimum wage increased to $10.10 per hour on January 1, 2018 under Hawaii law, research indicates that this amount is insufficient for a single adult needs to afford basic necessities in the state.  According to a recent Asset Limited, Income, Constrained, Employed (“ALICE”) report published by the Aloha United Way, a single adult needs a minimum of $14.06 per hour or $29,245 per year to afford the basic necessities in Hawaii, without accounting for any savings for unexpected expenses.  This figure is based on the Hawaii Average for 2015.  When aging the data forward based on a 3% salary adjustment trend in Hawaii over the last three years (according to the Hawaii Employers Council Salary Adjustment Survey Reports), the minimum amount would increase from $14.06 per hour closer to $15.14 per hour or $31,493 per year in 2018.

The media has reported that several Hawaii organizations, including the aforementioned banks, have plans to increase employee minimum wage to $15.00 as a result of tax reform.  Perhaps this trend will expand further, as the reality in Hawaii is that many workers are compensated well below the minimum amount needed to afford the basic necessities of survival.  According to the 2017 HEC Pay Rates in Hawaii Survey, for example, over five thousand employees were compensated below $15.00 per hour as of July 1, 2017.  In light of this challenging economic reality, it could be that the discussion around employers’ responses to tax reform may open the door for some organizations to consider a holistic approach to supporting employees through pay increases.

HEC conducts a variety of compensation and benefits surveys to provide data useful in developing and administering compensation and benefit plans, and personnel policies. Custom snapshots and comparison reports from our compensation surveys are available, along with customized, proprietary surveys conducted on your behalf.  Our Survey & Compensation experts can also work with members on employee opinion surveys to identify gaps between being an employer of choice and being merely an employer.  For more information, please contact Cathy Keaulani, Survey & Compensation Services Manager (ckeaulani@hecouncil.org), or Susan Amuro, Survey & Compensation Analyst (samuro@hecouncil.org).