When the pandemic began in 2020, employers scrambled to manage the fallout. Among other things, that meant adjusting pay levels, including for top performers who are needed more than ever in a still-unstable business environment, in which recruitment and retention are paramount. There’s still a lot to grapple with for the future, as the pandemic continues. Here’s what you need to know about COVID-19 and employee compensation.
It’s been a rollicky last couple of years for employers and it’s unclear how things will shake out, including the economy. That makes it very challenging for employers to plan, particularly where compensation is concerned. And that’s not even counting current high levels of inflation.
While some organizations were able to quickly pivot, others either couldn’t or didn’t and may take years to recover, if they survived. Some companies are wondering whether the pandemic will cause them to adjust their incentive plans downward to comport with the new business environment and economic reality.
Compensating Top Talent
It’s a tough challenge, trying to balance economic uncertainties against the need to pay top talent well. How each employer handles this depends on their situation, but you might want to consider ranking employees based on their capabilities and prospective future values. Once you’ve done this, some experts think you should increase the pay of the top one-quarter listed so that they aren’t poached by rivals. This requires establishment of a database that details worker abilities as well as what the organization needs. Ultimately, you’ll save money on recruiting and acquire the ability to move staff around in house.
The pandemic has caused a Grand Awakening of sorts among employees who emerged from stay-at-home mandates and other pandemic-related requirements seeming to want to better curate their employee experience. And as the economy and employment levels improves, these employees are getting even more picky, in terms of what kind of work they wish to do, and for whom. For many, this was after a protracted stint of unemployment pay and government restrictions against home foreclosures and evictions.
During the pandemic, compensation decisions have also been affected by regional differences. For instance, there was no marked dip in salaries in the nation’s Southeast last year, where development essentially remained on track.
How Companies are Managing
Many top organizational executives are trying to figure out what areas need bolstering and what kind of personnel is needed. Due to economic uncertainty stemming from the pandemic, there may be less money available for salary hikes, other than for the top one-quarter talent we discussed above. Organizations must be smart about employee compensation and where to give raises. The widespread shift to remote work has underscored the importance of IT types who can improve an organization’s digital platform, for example.
The Changing Environment
Before the pandemic, employees were paid as they traditionally have, and that’s based on their job description. Nowadays, with so many people doing flex-work, working on all-new assignments and contributing to team projects, how people are compensated gets a bit murky.
The bottom line is that when it comes to COVID-19 and employee compensation, it’s vital that you’re agile – you’ll need the ability to make changes as the situation continues to unfold. You’ll also need to keep tabs on the talent market, so that you can stay in the hunt for top people. Additionally, it’s hoped that you understand the value of flexible work when it comes to recruitment and retention, since such flexibility can offset any inability to offer pay raises.
It’ll be interesting to see what happens this year, in terms of COVID-19 and compensation, as pay will be affected by the pandemic and the economy, in addition to pressure on companies regarding big-picture societal issues such as diversity and equity.