HPM7205 TOTAL REWARDS MANAGEMENT

QAR ARTICLE

What COVID means to compensation

A compensation strategy must be dynamic to
survive a crisis such as COVID-19, experts say.
By: Tom Starner | August 3, 2020 • 3 min read
How COVID is impacting compensation | HRExecutive.com

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

QAR Questions for Contemplative Thinking and Reflection

Against the backdrop of this article, consider what are the challenges, risks, probable
solutions and paradoxes you as the HR Business Partner may have to contend with your
management and/or bosses in the following areas:

1. Cash Conservation, Salary Reductions and Benefits Deferral Arrangements

2. Impact on Performance-Based Compensation Methodology and Processes
3. Bonuses, Salary Increments and Merit/Performance Payouts
4. Performance Appraisal and Rewards Methodology
5. Jobs that are difficult to fill or have high turnover.
6. Retaining Talent
7. Jobs that are necessary to achieve business results.
8. Jobs whose compensation has experienced considerable inflation in market
rates.
9. Maintaining Company Culture and Trust
10. Adopting Smart Technology and AI To Reduce Workforce (as a cost saving
measure)