How The New Tax Law Could Boost HCM Tech Spending

Large businesses are diving below the surface of the Tax Cuts and Jobs Act, the tax law passed in December 2017, to uncover benefits that may not be as sexy as how C corporations and some LLCs are now treated, but could impact HCM technology spending.

HCM SpreadsheetThe consulting firm Mercer believes capital investment is high on the priority list for many executives, and that organizations that “carve out and commit to ramping up investments in building a workforce for the future, specifically, will position themselves for faster growth that widens their gap with the competition.”

Mercer argues that several conditions are increasing the urgency of investing in the workforce. First, it says the labor shortage is intensifying and notes that some economists believe unemployment rates could drop as low as 3.5 percent. That means recruiting and retention are going to become even more of a bear than they are now.

Second, at the same time artificial intelligence and robotics are creating fears of job loss, tax reform was sold on the idea of added benefits to workers. “If they go undelivered,” Mercer wonders, “could a ‘talent boiling point’ be near?”

That’s an especially good question when you consider that wages haven’t kept pace with the recovery, financial advisors say the majority of American workers haven’t adequately prepared for retirement, more companies increase the number of contingent workers they use in place for full-timers. In the face of all the hype about the gig economy, many employers have lost sight of the notion that many people don’t want to work for themselves—and so they’re nervous.

As they weigh their HR spending, Mercer suggests employers consider four things:

  • Determine whether your compensation strategy is competitive in today’s market—and will remain competitive as the market becomes more challenging. “Despite pay equity being a hot and relevant topic, many companies do not have a regular pay equity review process,” Mercer says. That means improved performance-review technology and analytics that can eliminate pay differentials stemming from bias will become more valuable.
  • Most companies rate themselves as ineffective at workforce planning, Mercer says. To our thinking, that increases the value of benchmarking tools that can help employers determine whether their existing workforce will align with looming changes in how work gets done. With that information, they can develop plans to make sure they have the right skills in the right place at the right time.
  • The idea of engagement isn’t going away. Organizations need to invest in programs “engage and empower employees to make valuable contributions lead to long-term gain.” For our part, we remain skeptical of how many companies make use–or at least effective use–of engagement software, but vendors who develop tools that can help create real cohesiveness seem to have bright futures in the near to medium terms.
  • “Measurement and continuous improvement are critical” when it comes to creating a successful culture, Mercer says. That might be stating the obvious, but it raises a good point: Employers continue to rely on surveys and similar tools for measuring their employees’ attitudes, but those same tools are often subjective and backward-facing. Vendors who can measure engagement in real time, and even use it as a predictive tool, will have a real advantage in HCM Technology.

Mercer’s arguments are compelling, but they don’t necessarily portend a boom in the need for HCM solutions in general. Taken together, however, they can help vendors build a stronger case for spending on HR technology that provides the hard numbers needed to convince CFOs and CEOs that their investment will show positive financial returns by facilitating improved performance, lower recruiting costs and improved retention.

Image Copyright: stocking / 123RF Stock Photo

Print Friendly, PDF & Email

, ,

No comments yet.

Leave a Reply