Near the end of quarter 1 of 2020, many cities and states began “shelter in place” protocols due to the growing spread of COVID-19. By the middle of the second quarter, most, if not all, states and cities were under some form of “shelter in place” direction. The operational impact for all employers was immediate. Organizations had to quickly adjust to remote operations. Videoconferencing and instant messaging have become the new normal for many.
America’s response to COVID-19 has had an immediate impact on organization’s compensation planning. The current pandemic has resulted in fluid, shifting decision making for both 2020 and 2021 compensation planning.
Near the end of April 2020, Astron Solutions conducted a five-question, yes/no format pulse survey. Distributed to Astron’s clients and Astronology® readers, the survey captures how COVID-19 has impacted 2020 and 2021 compensation plans. We are please to share the results of that survey with you.
Other consulting firms have conducted similar surveys. The consistent finding across all these surveys is that organizations are looking to modify 2020 base pay and short-term incentive programs at some point this year. Most surveys report participants considering reducing the percentage of planned base pay adjustments and reducing or eliminating short-term incentive / bonus payments. But with these adjustments comes growing concern regarding the changes’ negative impacts on employee morale and engagement.
Astron’s Pulse Survey: Participant Industry Demographics
The participants in our survey represent a variety of industries:
- Other Not–For–Profit Service (32.1%)
- Healthcare (17.9%)
- Manufacturing (14.3%)
- Education (10.7%)
- Insurance (7.1%)
- Other For–Profit Service (7.1%)
- Financial Services (3.6%)
- Hospitality (3.6%)
- Real Estate (3.6%)
Question 1: Base Pay
Survey Statement: “Our organization is considering modifications to the 2020 base pay compensation budget.”
39% of respondents are considering modifications to their 2020 base pay compensation budgets.
The strategies respondents plan to use include the following:
• Delay timing of implementing planned pay adjustments (43%)
• Reduce the percent of annual budget increases (29%)
• No pay adjustments this fiscal year (28%)
Question 2: Short-term Incentive Plan
Survey Statement: “Our organization is considering modifications to the 2020 short-term incentive compensation plan.”
29% of respondents are considering modifications to their 2020 short-term incentive compensation plans.
The strategies respondents plan to use include the following:
• Reduce the percent of annual payout (50%)
• No payouts (37%)
• Delay timing of implementing planned payout (13%)
Question 3: Sales Compensation Plan
Survey Statement: “Our organization is considering modifications to the 2020 sales compensation plan.”
7% of respondents are considering modifications to their 2020 sales compensation plans.
While this may seem like a low percentage, keep in mind that given the industry mix, a number of participants will not have commissioned sales roles on staff.
The strategies respondents plan to use include the following:
• Reduce the percent of annual payout (67%)
• Delay timing of implementing planned payout (33%)
Question 4: Hazard Pay
Survey Question: “Does your organization provide hazard pay?”
11% of respondents provide hazard pay.
For these respondents, hazard pay is
• Offered through base pay differential (67%)
• Offered in the form of a bonus payment (33%)
Question 5: 2021 Compensation Planning
Survey Question: Has your organization begun discussion on 2021 compensation budget planning?
32% of respondents have already begun to discuss their 2021 compensation budgets.
The remaining 68% of respondents plan to discuss their 2021 compensation budget during 2nd – 3rd quarters
• 2021 compensation budget planning discussions will occur during 4th Quarter (47%)
• 2021 compensation budget planning discussions will occur during 3rd Quarter (37%)
• 2021 compensation budget planning discussions will occur during 2nd Quarter (16%)
Astron’s Take: Insights from National Director Michael Maciekowich
Before making any compensation system changes, we need to go back to 2009 and reflect on the impact modifications to compensation programs had on employee morale and engagement. A major lesson learned at that time was the importance of protecting “mission critical” employees and positions during downturns. When the economy returns stronger than before, organizations do not have the time to “re-tool” to meet increased service and / or product demands. Employers that did not protect their mission critical positions were unable to re-tool as timely as competitors.
Leave a Reply