As COVID-19 continues to affect our daily lives and interrupt normal work days, more businesses are facing unprecedented struggles. Whether it’s revenue shortfalls due to the struggling economy or trouble transitioning employees to a work from home environment, organizations are unsure of how to keep their business afloat and staff members motivated.
This is a critical time to go over your own business’s compensation strategies and understand how exactly the pandemic will affect them, both in regards to immediate considerations and what lies ahead in the future.
In this crash course, we’ll go over a couple of key points on compensation during the coronavirus pandemic and how your business can continue to make the most of your current resources to keep your employees happy.
Immediate Considerations Concerning Compensation
As soon as COVID-19 began to spread, it was clear that it would greatly affect the global economy and marketplace. Businesses of all shapes and sizes suddenly needed to begin working from home or even shutting down temporarily to keep up with CDC and their local jurisdiction’s guidelines.
Aside from new revenue challenges and their impacts on direct employee compensation, indirect forms of compensation also need immediate strategy adjustments. Don’t neglect to consider how the pandemic can affect all aspects of your rewards and recognition strategy, like health benefits or other employee perks.
Keeping a sharp focus (or a new emphasis) on indirect compensation will only help you engage and retain employees, especially in times of uncertainty like this.
To more clearly understand the immediate considerations regarding compensation right now, we’ll be diving into the following topics.
1. New Legislation
Nothing has affected the economy so quickly like COVID-19. To respond to the sudden disruptions and adverse consequences, the government put out the following new laws and legislations to ameliorate the impact on businesses and overall economy:
The Paycheck Protection Program (PPP)
As a part of the larger Coronavirus Aid, Relief, and Economic Security (CARES) Act, the PPP was created to help smaller businesses with loans to cover salaries, health benefits, office rent, and utilities. While these funds cannot pay for paid leave, they can be converted into a grant if the employer maintains its staff from February 15, 2020 to June 30, 2020. However, the initial rollout was not without its challenges. On April 27, the second round of PPP benefits was rolled out to help those who hadn’t gotten relief the first time around. Due to the initial rollout’s difficulties, there might still be delays as you’re in line behind those who are still waiting from the first round. However, it also seems like PPP loans are averaging lower this second time, which might help ensure that more small businesses actually receive aid before the program runs out of funding.
Federal Paid Sick Leave
As part of the Families First Coronavirus Response Act (FFCRA), Congress outlined regulations for sick leave during this time. If an employee meets certain requirements, they should be able to get two weeks of paid sick leave at two-thirds of the employee’s regular rate (if full time). This could help your staff members who have to care for a sick family member or need to quarantine at home, and it reassures that they’ll still receive benefits during this time.
Expanded FMLA Leave
Also a part of the FFCRA, this expansion of the Family and Medical Leave Act helps employees who are unable to work due to caring for an underage child whose school was impacted due to COVID-19. While the first 10 days of leave are unpaid, for the next 10 weeks, they get paid at least a rate of two-thirds their regular rate of pay. This will greatly relieve the stress of your workers who are parents.
It’s important to be familiar with these programs, as they will directly affect your business and your employees for the foreseeable future. Make sure you effectively communicate these programs. Additionally, understand that they still have their issues and may not roll out as effectively as many would hope.
New legislation and its impacts should play a role in your compensation and rewards and recognition strategy going forward. For instance, if you are approved for a PPP loan, make sure you consider how to divide it towards all of your expenses and employee compensation before receiving it. Don’t scramble to create a strategy after receiving relief funding and risk forgetting critical expenses.
2. Impact on Organizations
How have organizations reacted to the impacts of COVID-19? Astron Solutions recently conducted a pulse survey to measure business’ compensation actions as of April 2020. This survey connected participants from all industries, including healthcare, education, and nonprofit. Here are the top takeaways:
- 39% of respondents are considering modifications to their 2020 base pay compensation budgets.
- 29% of respondents are considering modifications to their 2020 short-term incentive compensation plans.
- 7% of respondents are considering modifications to their 2020 sales compensation plans.
- 11% of respondents provide hazard pay.
- 32% of respondents have already begun to discuss their 2021 compensation budgets.
From the findings, it’s clear that the novel coronavirus’s impact on organizations is already substantial, with many employees feeling the brunt of adverse effects. It’s tough to truly understand how these changes will negatively impact employee morale and engagement going forward.
That’s why your employee rewards program is so crucial during this time, and it’s smart to think of other ways you can still restore and foster employee motivation.
3. Things to Keep in Mind
As we further navigate this “new normal,” here are a few elements to keep in mind regarding COVID-19 and how it affects your reward and recognition program:
- Incentive-based compensation programs are great to motivate your employees and maximize the money your organization saves. However, you should reconsider and determine if these goals are still achievable. For example, if you had incentives for your sales team, their ability to meet those goals might be substantially impacted by the disrupted economy. Instead, prioritize activities that will actually make revenue amidst the coronavirus impacts and pause quota-based variable compensation plans. Head toward a more straightforward commission-based payment model to offset any of the negative variables due to economic downturns. A commission-based model means your sales team isn’t committed to quarterly or annual goals to receive their pay, which is an effective short-term solution for sales teams struggling financially.
- To continue to motivate your workers with a financially-friendly approach, it’s a good idea to implement an instant rewards program for those who show exemplary behavior and efforts. Consider non-cash rewards, like gift cards or extra vacation days to use on a future date. These will have a greater impact than giving away equivalent cash bonuses for a number of reasons.
- Due to the COVID-19 pandemic, many businesses have had to layoff valuable employees just to keep afloat. If this is something you might have to turn to, review the WARN Act and relevant state & local laws to understand your responsibilities and protections as an employer.
If you’re able to move to a work from home model, that’s great. However, you may be concerned with how to ensure the right hours are being tracked for accurate compensation. Consider implementing specific times when employees must check in with a supervisor, as well as maintaining that they still must be taking normal work breaks. It’s important to create clear guidelines from the get-go that are compliant with both the Fair Labor Standards Act (FLSA) and your state laws.
5 Ways to Move Your Business Forward
While it’s important to take the time to remedy the immediate adverse effects this global pandemic has had, your organization also needs to consider the future. Ensure that your main goals and strategies are laid out clearly, especially if you plan to make major changes to your compensation strategies.
Consider the following five ways to move your business forward more confidently:
1. Maintain transparency.
No employee enjoys feeling clueless about the future of their job. Your compensation strategy should always be transparent to quell any questions or anxieties in your employees. This means frequently updating them on how your business is doing, explaining the rationale behind pay decisions, and not making any major decisions without a clear explanation.
2. Prioritize employee communication.
Whether your employees are working remotely or not, you’re likely going to see a decrease in face-to-face interactions for the upcoming future. Make sure you are still consistently communicating with employees, especially if you utilize an incentive compensation plan. This way, you have an accurate idea of who has been putting their all into their work.
3. Offer digital engagement opportunities.
If you had any compensation programs that required in-person involvement, it’s a good idea to move them over to a virtual alternative. For example, if you had a corporate wellness program that involved a gym membership, consider offering virtual options like an online fitness video service.
4. Don’t forget corporate social responsibility (CSR).
If your business has historically been active in corporate social responsibility, whether through matching gifts or a volunteer program, don’t let these goals fall to the wayside. According to Double the Donation’s review of COVID-19 impacts on matching gifts, many other companies are actually expanding CSR programs right now. Nonprofits and others will need more relief than ever, so it’s a good idea to offer your help in any possible opportunity. This also will help you strengthen ties for the future and position your business in a positive light.
5. Mitigate any financial risks for your compensation strategy in the future.
This can be as simple as moving away from static pay grades to outlining clearer guidelines to how compensation could change in the face of various adverse situations. It’s always helpful to be prepared, even if you never have to use that contingency plan.
This is a delicate time for everyone, including your business and each of your employees. Throughout whatever may come in the future, it’s important that your staff members feel a sense of stability throughout your business, especially in regards to any compensation changes you choose to make.
Ensure that your employees understand that any changes to your compensation aren’t simply about cutting costs, but rather that you genuinely value their hard work and effort towards the overall mission. Otherwise, you risk your employee engagement and retention rates, putting your business in a precarious position in a particularly bad time.
As we move forward, it’ll be more difficult than ever for many businesses to confidently predict what comes next for their compensation strategy. Hopefully this crash course gave you more insight into just how important it is to stay on top of new updates and best practices as they arrive.
Make sure to consider how any compensation changes will help you now and also impact your business as you look ahead. Above all, prioritize your employees’ needs and remember that without them, your organization wouldn’t be the same.