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This morning we are talking about companies who share their tax windfalls with their employees and what you need to know. 

Mellody, in recent weeks a rash of companies have announced they will be giving employees bonuses and other benefits in the wake of the recent tax cuts. What is behind these moves?

Lower taxes, Tom. The recently passed tax bill will see the nominal top corporate tax rate fall from 35% to 21%, providing a huge financial windfall for corporate America this year. It will mean companies will pay less in tax going forward, and it will also allow them to bring cash they earned overseas back to the US at a lower cost. As a result, in recent weeks many companies have decided they will use some of the money saved to reward workers.

What have companies announced?

Companies have taken a variety of approaches. Some have decided to give employees one-time cash bonuses. Others are raising wages, contributed to their employees’ retirement plans – either pension or 401k accounts, or by offering employees stock. Some have expanded their benefit offerings, including paid sick leave or parental time off, or tuition benefits. Many have announced some combinations of the above.

Are these efforts driven by altruism?

I think these efforts are being done for the right reasons. The fact is Tom, having happy workers who feel valued is in the best interest of any company. That is especially true in the current labor environment. We are in the ninth year of the economic expansion and at full structural employment; the labor market continues to tighten due to positive jobs growth and falling unemployment rates. This means that workers have the upper hand in the job market. This puts pressure on employers to hire and retain workers, and one of the best ways to do that is to improve their compensation through pay, or benefits, or both.

What advice would you give to those Americans who are getting a wage increase or a bonus?

If you are one of the Americans who has received a raise or a bonus from your employer, do not run out and spend it! There are a couple of things you can do with an unexpected windfall like this that will improve your long-term financial situation instead of satisfying your short-term desires. First, if you do not already have an emergency fund, or if your fund’s balance is low, put this money – a bonus or the extra earnings – in that account. If you already have an emergency fund, add this new money to your retirement account, or use it to pay down high interest credit card debt. These may not be the most exciting options, but they are the best for your long-term financial health.

Do you think we will continue to see companies invest in their employees going forward?

I do think that the strong economy and the tight labor market, coupled with continued efforts to increase minimum wages in numerous places around the country mean that we will mean workers will continue to see better numbers on their paychecks, and better overall compensation.

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