Question

Tax savings are being passed down

President Trump signed the Tax Cuts and Jobs Acts into law on Dec. 22, 2017, reducing personal income taxes for most families for the next 10 years. Corporations, however, received much bigger and more permanent tax cuts with the new law reducing the corporate tax rate from 35% to 21% and reducing the tax on repatriated cash to 15.5%. The Congressional Budget Office estimates businesses will save about $320 billion in taxes over the next 10 years. The tax overhaul prompted hundreds of businesses to offer bonuses and pay raises to their workers and expand employee benefits. Here’s a selection of companies that have passed on some of their savings to their employees. 37.

Wells Fargo

Wells Fargo (NYSE: WFC) smartly avoided paying out bonuses to its employees in the wake of tax reform. The company has a murky history with employee bonuses. Instead, it increased the minimum wage to $15 per hour, pushing competing banks to do the same. It’s unclear whether that pay raise is linked to the tax cuts as Wells Fargo’s press team has issued conflicting reports. Wells Fargo is also planning to donate $400 million to nonprofits this year. Wells Fargo stands to benefit from the 14 percentage point decrease in the U.S. corporate tax rate more than most other companies. Nearly all of its operations take place in the U.S. As a result, its effective tax rate could fall to about 22% this year, according to Goldman Sachs analysts, down from 33% last year. That would result in about $3.7 billion in tax savings. Even with a $1 billion fine hanging over its head, Wells Fargo is making out quite well from tax reform.

Companies will still come out ahead

There are many more companies that offered wage increases, bonuses, and other employee benefits in the wake of tax reform. Over 400 companies have announced plans to pass on some of their savings to employees in some form, with 4 million-plus workers receiving over $4 billion in bonuses, according to the GOP. Corporations should still come out well ahead even after paying out employee bonuses. The corporate tax cuts are permanent, and most companies opted to pay a relatively small one-time bonus compared to the benefits they’ll see this year alone. It’s also unclear if the wage and benefits plan increases are more closely tied to the tax cuts or a booming job market where companies are forced to compete more aggressively for labor. American workers are seeing more money in their pockets this year, but they need to save that money because it’s likely a one-time bonus and the personal income tax cuts aren’t permanent. Adam Levy owns shares of Apple, Express Scripts, Lowe's, and Starbucks. The Motley Fool owns shares of and recommends Anheuser-Busch InBev NV, Apple, CarMax, Chipotle Mexican Grill, Mastercard, Starbucks, and Walt Disney. The Motley Fool owns shares of Verizon Communications and Visa and has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short September 2018 $180 calls on Home Depot, and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Aflac, Amerco, CVS Health, FedEx, Home Depot, JetBlue Airways, and Marriott International. The Motley Fool has a disclosure policy.

We see the headline that states unemployment is at the lowest rate in history, yet we seem to miss the news that many organizations are laying off large numbers of employees. This is a real time example of the hazards that result from poor or no workforce planning. Pick one of the companies mentioned in the slide show and do a bit more research on the situation surrounding the layoff plan and then answer your discussion question for this week.

- Write a one paragraph summary of whether or not you think that workforce planning could have avoided or minimized the layoffs at the company you selected from the list. Explain your answer.

- Write a second paragraph giving your view on whether or not effective workforce planning can create a more stable employment situation for the average worker in the US. This explanation should demonstrate your understanding of the HRP process.

Answer 1

a. Workforce planning is an ongoing procedure for aligning the needs of the firm with those of its human capital in order to ensure it meets its objectives and organizational requirements. It is a critical element of large organizations. Workforce planning makes sure that the organization has the right people possessing the appropriate skills as and when required. It involves personnel planning and using cost-effective recruitment and training methods.

Tesla is laying off 7% of its workforce, that is, more than 3,000 people. According to the founder, Elon Musk, this is done to streamline the company. However, it is astonishing because in the last fiscal year, the company made significant profits. Tesla does not want to go back to loss-making business. As a result of which, the layoffs have been announced. The company could have minimized these layoffs had it followed a proper workforce planning process. The company could deploy other cost cutting measures rather than laying off employees. Tesla should have foreseen the upcoming tough times and could have hired employees on contractual basis initially. As a cost cutting measure, the temporary staff and contractual employees could have left and layoffs could have been avoided.

b. An efficient workforce planning model helps the organization in many ways. It can help review the current use of the human capital. It can help explore new ways for structuring the organization to best deploy the workforce. As a result, the company can have a streamlined recruitment strategy that is cost-effective and financially feasible. Workforce planning can definitely ensure a stable employment situation for an average worker in the U.S. With effective implementation of a strategic workforce planning model, the HR team can plan the future recruitment and staffing of the firm accordingly. The organization will keep in mind the issues with understaffing/overstaffing in departments and can act based on the circumstances, thereby avoiding unanticipated layoffs.