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Employers Adjust Pay and Incentives Amid Economic Turmoil

Metrics for incentive pay plans get a makeover

Source | | Stephen Miller | CEBS

New research reveals the coronavirus is prompting employers to upend their compensation plans for 2020 and beyond.

During the first week of April, the Society for Human Resource Management (SHRM) polled more than 2,200 HR professionals from SHRM’s membership about their pay programs. The findings, highlighted in How the Pandemic Is Challenging and Changing Employers, show that:

  • 38 percent of employers have decreased employee work hours.
  • 31 percent have laid off workers.
  • 19 percent have decreased pay rates, and another 21 percent are considering that measure.
  • 15 percent have permanently cut headcount with no intent to rehire.

Food and accommodation services have experienced the most significant setbacks during the pandemic, the poll showed: 76 percent of businesses in these sectors are laying off employees (versus an all-industries average of 31 percent), and 56 percent have decreased pay (versus 19 percent overall).

“Business is not as usual,” said SHRM President and Chief Executive Officer Johnny C. Taylor, Jr., SHRM-SCP. “It’s going to take business and HR leaders on the front lines of workplaces to be strong, innovative and agile as we all fearlessly face this hardship together.”

Similar findings were reflected in a survey by global consultancy Aon, which was conducted April 7-10 and drew 1,469 responses from North American employers and 1,889 responses from organizations around the world. The survey followed an initial study conducted March 17‑20.

Between Aon’s March and April surveys, a span of three weeks:

  • This trend mirrors Europe, where the percentage of companies making the same pay adjustments grew to 35 percent from 17 percent over the same period.
  • North American companies asking employees to voluntarily take reduced salaries to avoid layoffs reached 7 percent, while 10 percent of firms made involuntary pay reductions. Executive officers were most likely to be affected by these actions, but roughly 40 percent of firms cut pay across their full workforce.

“We know companies have a strong desire to help their people as much as possible, yet many firms also face very difficult economic conditions,” said Alex Cwirko-Godycki, chief strategy officer for the rewards practice at Aon.

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