The COVID-19 pandemic has provided stark examples of how a crisis can force organizations to take difficult actions around compensation and workforce strategies, often unheard of during business-as-usual circumstances. Here are seven lessons we learned during the pandemic.
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01
Contain costs quickly; protect employees
In the early days of the pandemic, organizations took swift and decisive cost-saving actions to prioritize job security for employees.
Figure 1 –Actions taken to contain costs quickly1
When/in cases where businesses have reopened , organizations are exploring a variety of new initiatives, from technologies that support remote work to programs that improve engagement and wellbeing. Many are also reviewing their rewards and reskilling programs for the “new normal.”
Figure 2 – New priorities for the rest of FY20201 -
02
Recognize and reward essential/critical talent
Organizations provided cash allowances as a primary reward for essential workers. They also explored other rewards such as non-cash meal benefits, shorter or flexible working hours and enhanced benefits for illness or disability.
Figure 3 – Rewards trends concerning essential/critical talent2 -
03
Rethink executive total compensation
Approximately 20% of organizations globally cut executive pay by June 2020, but these changes were temporary and expected to last only between three to six months for most organizations.1,2
Figure 4 – Organizations that reduced pay for executives versus for entire employee populationA small percentage of organizations also restructured their executive total compensation program, for example, delaying goal setting for annual incentive plans and adjusting long-term incentive plans. The majority of organizations, however, adopted more of a “wait and see” approach and did not make any changes, opting instead to observe how the situation continues to evolve over time.
Figure 5 – Changes implemented on annual incentive plans1
Figure 6 –Changes implemented on long-term incentive plans1
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04
Accelerate digital transformation
When organizations moved most of their workforce to remote, non-office-based locations during the crisis, and are now potentially extending and/or expanding remote working well beyond it, a heightened need to strengthen the security and reliability of digital infrastructures emerged. This, in turn, led to a more focused hunt globally for digital talent skilled in high demand areas such as cryptography, AI and machine learning and cloud engineering.4
Figure 7 – Most in-demand digital skills globally3While many organizations expect to bring a large percentage of their workforce back onsite post-crisis, certain roles will remain remote. To enable longer-term remote working, organizations are looking at tools and resources needed to support their remote workforce.
Figure 8 – Organizational responses concerning remote work1 -
05
Ensure fair and equitable compensation for all
Organizations prioritized transparent and timely communication on compensation, including changes to pay such as reductions and freezes. This ensured employees viewed any compensation decisions as fair and equitable, and enabled them to manage their finances and salary expectations through uncertain times.
Figure 9 – Organizations that took actions on communication about pay1 -
06
Make environmental, social and governance (ESG) metrics a priority
Even before the pandemic hit, organizations around the world had already begun incorporating ESG metrics into executive incentive plans, as part of a push towards developing a greater sense of corporate purpose and responsibility. COVID-19 helped accelerate those actions.
Figure 10 –ESG-related emphasis in total compensation framework post-COVID1
In fact, in our recent survey1 on post-COVID actions, organizations indicated human capital-related goals were among the top areas of emphasis in the total compensation framework for executives. These include a greater focus on employee wellbeing, corporate culture, job redesign and employee reskilling.
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07
Base decisions on sound market data
Organizations should continually reference market intelligence to determine measured responses to crucial work and rewards questions. Here are five examples of where market intelligence could support compensation decisions in uncertain times.
Figure 11 - Key considerations to support compensation decisions in uncertain times.
References
1 2020 COVID-19 Actions to Restore Stability Survey – North America
2 2020 Salary Budget Planning Survey – Global
3 2020 Artificial Intelligence and Digital Talent Survey Report
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