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How COVID-19 changed compensation

Pandemic has pushed businesses towards an employee-first mentality


July 21, 2020
By Brian Hughes

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Many grocery store workers received a temporary boost in pay due to COVID-19. (pixfly/Adobe Stock)

Compensation planning and analysis ranked fifth out of 25 of the biggest challenges facing human resources in 2019, according to Ontario’s Human Resources Professionals Association’s 2019 HR Trends Survey report.

However, towards the end of the year, most conversations within HR circles were about talent retention, technology advancement and leveraging data to unearth vital business insights.

With a focus on retention and culture, many companies were willing to pay above-average market rate for top talent and ended the year paying out full bonuses to employees, thus lowering turnover rates.

When the COVID-19 pandemic swept across Canada in March, compensation planning became every HR leaders’ priority, as countries and companies switched gears to remote working overnight.

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South of the border, the Society for Human Resource Management started their second quarter by polling 2,200 of its members, revealing that more than 30 per cent had laid off workers, while close to 20 per cent had decreased employee work hours.

The survey showed 19 per cent had reduced pay rates, while 21 per cent had considered it.

What’s more, 15 per cent of those polled had “permanently cut headcount with no intent to rehire.”

Hero pay, and more

COVID-19 has taken compensation planning and turned it on its head. It has also elevated the importance of retaining existing employees — more than ever before.

To boost positive morale amongst employees, some organizations demonstrated profound gestures by paying their quarantined staff for the full two-week period of their isolation, no questions asked.

Some also gave employees engaged in COVID-related activities for customers a 50 per cent markup on their earnings.

Since then, HR managers have pivoted from a business focus to an employee-first mentality.

They have expanded their mindsets to listen to the call of the day, what was needed and how their employees felt.

This is a significant shift in how human resources leaders spend for the business, especially around compensation.

Best practice post-COVID

Organizations that emerge from the pandemic should implement the following compensation best practices:

Take full advantage of the federal Work-Sharing (WS) program.

WS is an effective way for companies to retain top talent that had to endure reduced hours and pay. By being flexible and using this government program, it shows employees that their company is invested in their financial security.

A work-share model of business allows well-trained employees to avoid being laid off during a crisis, with the promise that they can return to their jobs.

It is a better alternative than being only on employment insurance.

Create an internally managed reduced work hours or workweek for middle to senior managers.

Implementing this offers managers the option to stay employed on a reduced schedule to offset a decrease in salary or a termination.

It also paves the way for more transparency in communication and employee engagement, leading to longer-term commitment.

Offer voluntary temporary layoffs.

Allowing employees the choice to take time off for a few months so they can spend time with their families or take a vacation helps deliver on work-life balance.

When employees are given the option to take temporary leave, it can help lessen a manager’s stress from having to make a drastic permanent decision, while also aligning with employees’ needs.

Honour salary increases that were recommended before a crisis.

This conveys that an organization will stand by their employees even in tough times.

It makes a strong statement of commitment and support that goes a long way in aiding talent retention.

Remain flexible, transparent and open to uniqueness amongst employees.

As many working arrangements may never be the same or fully return to the “way it was,” organizations need to strive for equity — not necessarily total equality.

Compensation may come in the form of allowances to cover additional costs for working from home, instead of larger salary increases. This may even save companies costs with lower brick-and-mortar requirements.

Some employees may want to continue a shorter workweek at reduced compensation.

Trust must be built first. Expectations should be co-created and clearly defined to find the best mutually agreeable arrangements in this new world of work.

Do not underestimate other non-cash compensation opportunities.

As the next generation enters the workforce, curiosity is at an all-time high. Employees want to be informed, involved and acknowledged — almost instantly.

Keeping employees informed about company plans is a start. Identify projects or other opportunities where organizations can leverage new employees’ current knowledge and strengths.

This does not only engage employees but expands the organizational capacity and capabilities for higher performance.

Recognizing employees’ abilities and providing stretch situations are truly valued by most high performing individuals — this should not go unnoticed.

Many employees would forgo additional compensation (presuming they are making a living wage and are not distracted by compensation levels) for development opportunities.

Conferences and training events are other great replacements for cash compensation — building capability at the same time.

Going beyond salary

COVID-19 has brought high visibility to how HR managers should show up for their employees.

For leaders, it is critical now to exhibit more flexibility in how teams are resourced quickly, how transparency is managed around sticky compensation issues and how holistic their commitment and understanding is of employees’ safety culture.

Compensation best practices go beyond salary considerations.

In a market that continues to be driven by candidates, the top performers are going to gravitate towards employers that have a proven record of fair and open compensation practices, rewarding performance and providing equal growth and learning opportunities.

This commentary has been updated.

Brian Hughes is a strategic advisor and board member at the Strategic Capability Network, a membership-based organization founded in 1979 for business leaders by business leaders. He is vice-president of human resources at FirstOnSite Restoration in Mississauga, Ont.