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    Starbucks Using Tax Cuts to Improve Pay, Benefits for Workers

  • Industry News January 24, 2018
    Starbucks
    Starbucks said it will spend nearly $7 billion of capital to build and renovate stores, manufacturing plants, and technology platforms in the U.S. over the next five years.

    Long lauded for its commitment to employees, Starbucks is taking an infusion of capital from new U.S. corporate tax cuts and investing it back into the workforce, the company said Wednesday.

    Starbucks said the new offerings would total more than $250 million and affect over 150,000 employees.

    “For more than 30 years, Starbucks has continued to challenge the status quo offering comprehensive employee compensation for our partners [employees]. We were one of the first retailers to offer full healthcare benefits to our—even those working part-time—and more recently we revolutionized access to a tuition-free four-year degree for all partners with the Starbucks College Achievement Plan through our partnership with Arizona State University,” Kevin Johnson, CEO of Starbucks, said in a statement.

    The changes include:

    A new “Partner and Family Sick Time” benefit for all U.S. employees, expected to launch this year. This will allow employees to accrue paid sick time based on hours worked and then use them if they or a family member needs care, Starbucks said. Sick time will accrue at a rate of one hour for every 30 hours worked. So an employee working 23 hours per week can earn five days of sick time over the course of a year. For store employees, Starbucks expanded its parental leave policy to include all non-birth parents with up to six weeks of paid leave when welcoming a new child.

    “Today, we are proud to announce additional investment in stock, wages, and a new Partner and Family Sick Time benefit that will further enhance our industry-leading approach. Just as we have always felt strongly that our partners are key to our business success, we have also known offering a valuable, comprehensive benefits package helps us retain our valuable partners,” Johnson added.

    Starbucks also announced its second wage increase for all U.S. hourly and salaried partners in addition to the annual increases already granted in fiscal 2017. In April, all eligible U.S. hourly and salaried employees will receive the boost. This includes an investment of about $120 million in wage increases that will be allocated based on regional cost of living and laws that vary state by state.

    Next, Starbucks announced an additional 2018 stock grant with a one-year vest. On April 16, the company will provide the additional grant for all eligible full-time, part-time, hourly, and salaried U.S. employees across all Starbucks’ stores, plants, and support center who have been active as of January 1. All retail employees will receive at least a $500 grant, the company said. Store managers will receive a $2,000 grant, and plant and support center employees (non-retail) grants will vary depending on annualized salary or level. This investment alone, Starbucks points out, is valued at more than $100 million.

    Starbucks reaffirmed its commitment to create more than 8,000 part-time and full-time retail jobs, as well as an additional 500 manufacturing jobs in its Augusta, Georgia soluble coffee plant as well.

    The investment is just part of what Starbucks said is nearly $7 billion of capital intended to build and renovate stores, manufacturing plants, and technology platforms in the U.S. over the next five years.

    Starbucks did not share how much it expected its tax bill to drop under the new plan. More details are expected during Thursday’s first-quarter earnings call. According to Reuters, Credit Suisse analyst Jason West estimated that Starbucks’ global tax rate could fall to about 24-25 percent from around 33 percent. This would create about $425 million in annual tax savings.

    Starbucks remains committed to comprehensive health care benefits and marketplace, disability, and life insurance benefits, a 401K savings plan benefit and the Starbucks College Achievement Plan, which is a free tuition benefit offered to Starbucks partners together with Arizona State University.

    “The value of Starbucks benefit package [fully accessed] is unmatched by other retailers and provides thousands of dollars above the value of other companies compensation offerings. I am extremely proud to share that in the past four years Starbucks has made an investment of nearly $800 million in employee compensation and benefits—a testament to our belief in our people and the role they play in creating the Starbucks Experience,” Johnson said.