What COVID means to compensation

This is the second in a series on compensation during the pandemic. Read the first installment here.

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The coronavirus pandemic has upended scores of traditional HR structures: hiring, recruiting, onboarding and compensation. The latter is one area, experts say, that has become increasingly more complex, as employers must consider the full context of the pandemic—both now and what may come in the near future—while they redesign approaches to compensation.

Ben Carter, vice president of total rewards at Workday, says one of the most serious pandemic-related compensation challenges is deciding how to manage a more distributed and remote workforce. With 100% remote work and no plans for now to return the entire workforce to full-time office-based employment, many Workday employees are looking at moving from expensive or tax-heavy locations to less costly ones.

Related: Will other employers follow Google’s latest remote plan?

Ben Carter

“While we’ve traditionally paid by geographic zones to account for cost of living, we now have to rethink our pay strategy and how to compensate people who physically move from one zone to another,” Carter says.

Another puzzle? How to manage the shift in pay strategies for the way work gets done. That means moving from more traditional pay plans (fixed, variable, full-time workers) to an “a la carte” solution—featuring such options as pay on demand, project-based pay, flex pay and others.

“We are also looking at the flexible work arrangements that we need to allow, such as 4 x 10 [a four-day week with 10 hours a day], job share, flex time for coverage,” Carter says.

He explains that the pandemic has forced employers like Workday to change compensation quickly and at scale, relying on tools such as hardship pay, one-time bonuses, severance packages and salary reductions.

“Many employers have had to revisit strategies such as performance-based compensation programs,” he says, noting that can create the potential for a “domino effect”—when compensation reduction can impact eligibility for benefit programs.

See also: HRE‘s Number of the Day-Benefit reductions

“With that, employers need to be able to not only understand the immediate impact, but any dependencies that will be triggered with compensation changes,” he says.

In the same vein, Carter notes that HR should consider how their organizations are managing performance in this environment, especially for people who have taken on child- or elder-care responsibilities.

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“Organizations are working to figure out how to take the stress of these unprecedented circumstances into consideration when determining performance-related compensation adjustments,” Carter says.

Ruth Thomas, principal and senior consultant at Curo Compensation, says that to help meet the challenges of pay equity and fairness—especially in these stressful times—her company is now offering a product called Cohort Analysis. The solution enables organizations to perform a pay analysis on cohorts of employees who are performing similar work, taking into account factors like tenure and performance.

Within this insight, she says, clients can better understand and remedy potential pay-equity disparities, particularly useful for smaller organizations where employee numbers might not be large enough to run statistical modeling.

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“Addressing pay equity and fairness has never been more important,” Thomas says of today’s uncertain economic climate.

Sudarshan Sampath

Sudarshan Sampath, director of research at Payscale, says that while compensation is not immune to the impact of COVID-19, unlike in a more typical recession, many employers see the economic downturn as temporary—since consumer spending will likely recover as circumstances improve.

Related: How employers should address employees’ 401(k) concerns

“So, they might turn to temporary wage reduction to protect their employees from layoffs, which could also boost employee sentiment,” he says. Sampath adds that a recession’s compensation strategy may involve refocusing on what job titles are considered critical to revenue or production or a change in what jobs are now in high demand or have become less competitive due to widespread layoffs.

“A compensation strategy should be dynamic enough so that, even in the face of complications due to economic circumstances,” Sampath says, “the organization’s talent and resources are secure.”

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This is the second in a series on compensation during the pandemic. Read the first installment here.

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