It’s a challenging time. When a pandemic like the coronavirus outbreak leads to COVID-19 infections, serious illness and even death, we are all impacted. Lives change. At home and at work. Indeed, for many U.S. corporate workers, home has become the workplace, and employee interactions take place online instead of face-to-face. These fundamental changes in working relationships cause leaders and executives to re-examine all aspects of administration and management as well.
For example, many in leadership roles are now advising executive teams on essential changes – short-term or longer lasting – to employee compensation. Never has it been more critical for employers to decide how they are going to treat employees. And that decision begins with a fundamental question: “Are your employees an investment or an expense?”
If you are a corporate leader, how you answer this question will guide essential decisions you make during a crisis. For instance, if you consider your employees an investment, then you might act as the Yum Brands and Texas Roadhouse CEOs have and forego your salary to keep more employees working. These top executives have clearly seen the long-term value of leading with their hearts. On the other hand, you might decide your employees are an expense and that during this “crisis economy” they aren’t going elsewhere. Right now, that’s probably true. However, it pays to remember that employers who took this approach with employees during the last economic crisis lost key talent after the economy rebounded. Can your company afford to put itself in that position? If not, be sure to do all you can to ensure your employees feel appreciated during this crisis that is taking a toll on their mental health as well.
Survey Highlights Innovative Compensation Practices
How are companies large and small adapting their compensation practices during this crisis period? Total Reward Solutions recently surveyed clients to find out. Many respondents indicated they were innovating with positive, affirming and generous initiatives such as:
- Piloting an alternative work program to help affected employees maintain some work hours. This is important because layoffs not only affect earnings potential but also creates a termination event which causes a loss of benefits just when employees – and their families – need them most. For example, an Employee Assistance Program (EAP) might be more important than ever.
- Giving affected employees their full-year Paid Time Off (PTO) allotment rather than requiring them to earn it on a pro-rated basis throughout the year. This is a generous offer, the kind that can foster employee gratitude and loyalty.
Other innovative ideas necessary for the long-term economic wellbeing of the organization (and its employees) might include:
- Reducing benefits such as 401(k) matching in order to reallocate those dollars to pay for other benefits. (Just keep your testing in mind and work with your benefits/retirement consultant before making any benefit plan changes.)
- Deferring planned or periodic salary increases to save costs
- Adopting a 4-day work week while keeping regular work hours, thus cutting salaries by 20%
- Cutting salaries to only top-level employees in order to preserve pay levels for lower-earning employees who might be living paycheck to paycheck as they struggle to survive
- Implementing job sharing initiatives to keep a larger number of employees working at least part time
- Offering employees the opportunity to take unpaid leaves of absence (after following the new required Families First Coronavirus Act, for example). This might allow these workers the chance to pursue a long-desired educational pursuit or other project.
- Offering voluntary retirement as a way to help older workers pursue their next chapters while keeping larger numbers of younger employees working
- Furloughing employees rather than laying them off
Not all employers can afford to maintain business as usual during a crisis. Many are literally fighting for survival. But flexibility and innovation in compensation during challenging times tells employees that your organization cares and values them as an investment rather than an expense. And this commitment from the organization often nurtures greater trust and loyalty.
Cassandra Faurote is President of Total Reward Solutions, a compensation consulting firm and author of Compensation Sense 101: Common Sense Answers to Your Questions About Employee Compensation and Total Rewards. You can reach Cassandra by clicking here.