How to Pay Your People Right — Even in the Age of COVID-19
The ongoing pandemic has thrown our economy into turmoil. Companies have had to find strategic ways to keep their people safe while also remaining productive and profitable. Unfortunately, many public-facing businesses, like restaurants, hair salons, and movie theaters, shuttered entirely, putting their owners under extreme financial stress. (In fact, many may never re-open.) And those businesses lucky enough to function with their employees working remotely have had to establish new operational protocols.
Even as businesses around the country reopen, they’re forced to face yet another challenge: how to navigate employee compensation. Under normal circumstances, most companies provide deserving workers with merit increases at least once a year. But the current circumstances are anything but “normal.” Does this mean merit increases should be deferred? Should raises of any kind be considered as the economy sits perched on the edge of serious recession?
As an employee compensation specialist, I am being asked to weigh in on this issue on a constant basis. On the one hand, the country’s economic future looks particularly precarious. Although, thankfully, new unemployment claims actually fell last month, defying the gloomiest expectations, overall unemployment rates remain at Great Depression levels. On the other hand, providing employees with adequate compensation remains a key component in maintaining worker morale, cultural cohesion, and of course, long-term productivity.
Why does this matter so much? It’s simple. Employees who (rightly) feel their efforts — and sacrifices — aren’t being justly rewarded are apt to reconsider their options and may even look for other opportunities. Yes, even in economic downturns!
Recently I was quoted in Forbes as saying in spite of so much talk about AI-based automation taking our jobs, ultimately, people remain any company’s most important asset. In order to not lose your key personnel, especially at a time when so much is at stake, it is crucial for senior leadership to think deeply about the compensation issue.
Here are some guidelines I offer companies regarding pay in times of economic downturns, both now and in the future:
If cashflow is low, it is acceptable to temporarily pause merit increases until circumstances improve. However, it is crucial to prorate when you restart.
Be sure any merit increase pause is a reaction to the specific economic circumstances. Importantly, don’t assume “everyone else” isn’t going to give them, so you needn’t, either. In 2009, during the depths of the Great Recession, approximately 30 percent of companies didn’t give merit raises. This means the other 70 percent did.
If your organization can still offer merit increases, do so, but consider making them smaller should the economy fail to rebound. (In 2009, raises averaged 1.5 percent, but fell to an average 1.2 percent in 2010.) We can expect similar contractions in 2021.
Don’t give so-called “hazard pay” unless truly warranted. However, if employees are forced to work in tight quarters or deal directly with the public, such bonuses may indeed be justified under the current circumstances.
Do give gift cards or other tokens of appreciation along with a big thank-you to your personnel who are working in difficult/risky conditions.
If you don’t have one already, establish a compensation committee to break down silos and turf battles regarding pay. (When leaders from across departments gather to discuss shifts to pay grades and other forms of compensation, each group’s instinctive drive to protect its own interests can begin to diminish.)
Do keep lines of communication between staff and management open. Leaders need to let employees know what decisions they’re making, and why. In times of stress, anxiety, paranoia, and rumors can run rampant. These can spell death for even the best-run organizations.
At the end of the day, your people know these times are tough. You know these times are tough. But if you follow the above suggestions and are honest — and compassionate — with your team, you may be surprised at how flexible and accommodating they can be. If this pandemic has shown us anything it’s that our collective fortunes rise and fall together. Acknowledging this truth while honoring your staff’s contributions is the best way to keep your people committed to your organization.
Are concerns about compensation in the time of COVID stressing you out? I would be happy to help. For information on how my team and I can help your business not just survive but even thrive in these challenging times, feel to contact me at laura@conoverconsulting.com.