Using OBBBA tax benefits to strengthen workforce strategy

When additional capital becomes available for workforce investment, as it did following the One Big Beautiful Bill Act (OBBBA), business leaders must decide which workforce priorities deserve additional funding.

In RSM’s Q2 2026 Middle Market Business Index (MMBI) survey, 86% of senior executives who expect the OBBBA to affect their organizations said increasing employee compensation or benefits would be an absolute, strong or moderate priority for applying those tax benefits. Hiring ranked close behind at 78%, while 75% cited one-time employee rewards as a priority.

Higher wages, enhanced retirement benefits, performance incentives, retention bonuses and employee development programs serve workforce goals differently. They may improve competitiveness, reward performance, support retention or build future skills. Each also carries its own cost and staying power.

Business complexity raises the stakes of that decision. Workforce investments should support the company’s plans and work across the functions and systems responsible for implementing them.

“You have your existing workforce, but where do you need to go in the future?” says Anne Bushman, an RSM US partner and the firm’s compensation and benefits tax leader. “Is this an opportunity to attract people you are missing now, or do you need different roles based on the company’s strategy?”

Evaluating pay gaps, incentive structures and future talent needs

Senior executives who said they plan to increase compensation or benefits are not concentrating their spending in a single area. Instead, they are evaluating a range of approaches, including wages, retirement benefits and performance incentives.

So how can a company identify an approach that aligns with its workforce goals?

Start with compensation data. A compensation study can show where pay has fallen behind the market, whether the mix of salary and performance-based compensation supports business objectives, and whether compensation gaps are widespread or concentrated in specific roles.

“Do you know where your pay gaps are? Do you know whether your incentive mix is too light or too heavily weighted?” says Ian Ziegler, an RSM senior manager and the firm’s compensation consulting leader.

Those findings can help leaders target funding where it is most needed. A company with market-based pay gaps may decide to focus additional spending on specific roles rather than approve the same increase across the workforce.

If base pay is already competitive, leaders may determine that incentives or retention-focused investments would better support their objectives. Employees may place greater value on enhanced retirement benefits, education assistance or other workforce investments.

Finally, align workforce decisions with future business needs. Business plans can help leaders determine whether available funding is better spent on hiring for missing capabilities or on developing those capabilities within the existing workforce.

Balancing recurring compensation against one-time employee rewards

The OBBBA-related tax benefits should be considered alongside the company’s other funding priorities in the capital allocation process. Ziegler cautions leaders against treating the additional capacity as “found money” and spending it hastily simply because it was unexpected.

The choice depends partly on reach and duration. Some investments address a broad employee population; others concentrate spending on specific roles, behaviors or capabilities.

For example, higher wages create recurring labor costs, while enhancements to retirement plans can add ongoing expenses tied to plan design and employee participation. Performance incentives offer businesses greater flexibility by linking compensation to defined results, while one-time awards limit initial commitment.

One-time cash bonuses are a common choice among middle market companies that prioritize employee rewards. In the MMBI survey, 80% of senior executives who identified one-time rewards as a workforce priority said they would use a one-time cash bonus.

Bushman encourages leaders to consider how long they want the workforce benefit to last. A one-time bonus may be appropriate when the goal is immediate recognition or a near-term morale boost. Investments intended to improve retention, close a skills gap or support a multiyear business plan typically require a longer-term commitment.

Additionally, Ziegler recommends collecting employee input rather than relying solely on management assumptions. For example, compensation data can identify pay-related issues, but it does not reveal which benefits employees value most. 

Managing HR, payroll and tax execution before program announcements

The effectiveness of a workforce investment depends not only on the program design but also on its execution. A workforce investment becomes more complicated once it reaches the teams responsible for administering it.

A cash bonus, for example, may be treated differently under a retirement plan depending on the plan’s definition of compensation and the payment’s payroll coding.

“If an employee receives a cash bonus, does it count as compensation for determining the employee’s 401(k) contribution and the employer match?” says Amber Salotto, an RSM managing director and leader of the compensation and benefits practice within Washington National Tax. “All those details matter, and they depend on the quality of the payroll data going in.”

Education benefits may have taxable components, while information recorded in a benefits or equity system may need to flow accurately into payroll.

Early coordination gives HR, finance, tax, payroll and technology teams time to resolve definitions, coding questions and data gaps before the investment program is announced. That preparation can reduce the risk that employees experience something different from what leadership intended, helping preserve trust in how compensation and benefits are delivered.

Measuring performance metrics and ROI on workforce investments

The business need that prompted a workforce investment should also determine how the company evaluates it. Bushman says a company introducing spot bonuses to address morale, for example, could monitor employee sentiment. At the same time, investments in education and training could be assessed based on whether employees develop the targeted skills.

Leaders should define the intended result, establish a baseline and decide how they will assess progress before committing the funds. Otherwise, participation rates or dollars distributed could be misconstrued as evidence that the investment worked.

Evidence of actual results should also inform future spending decisions, particularly when an investment creates an ongoing financial commitment beyond the initial OBBBA-related tax benefit. Strong results may support continuing the program, while weaker outcomes may point to a different design or use of capital.

The OBBBA can influence the amount of capital a company has available. Workforce results help leaders assess whether that capital was advancing the organization's intended objectives.