Posted on 14 Jan 21byClea Badion
Just about everything in the world of work has changed since COVID-19 became the new normal, including how companies approach employee compensation. Building a compensation strategy for 2021 is especially tricky for organizations that have experienced a pandemic-related slowdown.
For example, Nelson’s Q4 Pulse Report shows that between the end of 2019 and Q3 2020, revenue growth was elusive for the majority of companies surveyed. Although 26 percent of organizations reported income growth, 36 percent saw no change in revenue, and 34 percent experienced a decline.
In addition, the Federal Reserve has suggested that full economic recovery is unlikely until people feel safe returning to pre-pandemic activities. Although the distribution of COVID-19 vaccines will likely foster a more “normal” business environment, no one knows exactly when that will be.
Plan your pay strategy
It’s against this uncertainty that companies of all sizes and sectors must develop competitive pay rates for the coming year. Here are some helpful tips to help you develop your plan:
Restore pay if possible
Perhaps your firm reduced salaries to avoid staff reductions in 2020, but you anticipate business will return to normal in 2021. While employees likely understood the need for short-term salary reductions vs. layoffs, it’s important to reinstate full salaries as soon as possible.
This is especially important for the many employees who are working longer unpaid hours during the pandemic or managing childcare while on the clock. Bringing back full salaries will go a long way toward motivating and retaining your team.
If you’re unable to restore salaries, show appreciation and support in other ways:
Accommodate remote schedules for employees with children at home.
Express appreciation for a job well done.
Check in frequently with staff members.
Shift or postpone projects for employees who feel overwhelmed.
Offer raises or bonuses
If your firm has returned to solid financial ground, raising pay is an excellent way to reward staff members for their hard work during the pandemic. Offering a salary increase may also reassure employees that your business is back on track and will help prevent top performers from seeking work elsewhere.
What about employers who are hesitant to increase pay due to economic uncertainty? One option is to give a smaller-than-normal increase. Another idea is to offer variable pay based on performance, such as a bonus. A variable pay approach provides more financial flexibility than a raise during uncertain economic times.
According to Willis Towers Watson’s survey results, 84 percent of U.S. firms plan to give some level of pay raise in 2021, although one in three is reducing their projected salary increases. Another two-thirds say they will give annual bonuses.
The pandemic permanently changed the office-based work model for many businesses. In fact, three out of four employers in our 2020 Q4 Pulse Report said they now offer more remote work options. Adjusting pay for different locations can be another consideration of your compensation strategy.
The Nelson 2021 Salary Guide, a popular annual guide listing compensation across industries, is a great resource for customized salary recommendations in different locations.
Know what the competition is doing
Because every industry has been impacted differently by the pandemic, it’s important to know how other organizations in your sector are managing raises and bonuses. For example, the pandemic and resulting shutdowns have impacted travel and hospitality businesses more than technology companies.
So while restaurants and other related businesses have less flexibility to offer raises, they still need to know what others in their space are doing to stay competitive. A staffing professional can offer local market insights and detailed salary knowledge of your industry and geographic area.
Remain competitive with new hires
When brining on new team members, consider looking beyond current unemployment numbers and economic conditions. Offering competitive pay from the get-go demonstrates your commitment and respect to employees. In turn, you will likely increase employee loyalty and retention when more jobs open up post-COVID.
Additionally, despite increased unemployment, pay rates have increased in some industries, creating a candidate’s market for high-in-demand roles. The Nelson 2021 Salary Guide provides insight on new-hire salaries across industries and geographic locations.
Communicate your plan to employees
No matter your approach to employee compensation in 2021, be transparent about your decision-making process and the financial impact to your team.
For example, if you are reducing or forgoing employee raises and offering bonuses instead, explain the reasons for your decision.
Feeling in the dark about salary changes, even good ones, can impact employees’ motivation and loyalty. On the other hand, team members who fully understand financial decisions and feel they are being treated fairly are more likely to stick around through uncertain times.