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The Impact of the Coronavirus on 2020 Compensation Best Practices

Every year, PayScale conducts the largest survey of its kind to bring you our annual Compensation Best Practices Report (CBPR). The CBPR offers the most in-depth insights into HR priorities and practices around compensation and benefits as well as the latest trends in talent acquisition and retention for North America.

The 2020 Compensation Best Practices Report also shows the top trends we can expect to see around compensation and benefits in 2020 as well as what top performers did differently to exceed revenue goals in 2019. These trends include compensation increases, strategies around variable pay, how organizations reward top performers, policies around pay communications, and the benefits and perks that are gaining traction.

The 2020 Compensation Best Practices Survey gathered responses from November 7, 2019 to January 8, 2020. There were almost 5,000 respondents to over 100 questions.

A webinar covering highlights from this report was conducted live on March 19, 2020. In addition to highlights from the report, the webinar also covered the impact of the Coronavirus. This webinar is now available on the PayScale website as a recording.

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Impact of the Coronavirus on CBPR

The 2020 Compensation Best Practices Report is based on data from the previous year and was analyzed in early January before the coronavirus was declared a pandemic. The intervening weeks have seen sweeping societal and economic changes that have impacted businesses across the globe and altered the course of 2020 planning.

Although we believe that insights from the 2020 Compensation Best Practices Report are still relevant – and still best practices – we recognize that many organizations have had their attention diverted to other concerns in recent weeks. In addition, the state of the economy has changed from what it was in late December and early January.

In December, The U.S. Bureau of Labor Statistics (BLS) reported the national unemployment rate at 3.5 percent. This was 0.4 percent lower than 2018 and a 50 year low for the United States. In January, there were still more job openings than available talent. At the time, there was every indication that 2020 would continue to be a strong economy and a candidate-driven market — the most competitive candidate market we have seen to date.

That optimism changed in late January when the World Health Organization declared the coronavirus a global health emergency. In the two months since, the world has watched anxiously as efforts to contain the pandemic through social distancing have led to many employees working remotely from home while some businesses have had to close shop all together either temporarily or permanently. Many employees in service jobs that are dependent on in-person clientele have either been laid off or suspended from work. As a result, the future of the economy is now uncertain.

On Thursday, March 26th, the Labor Department reported that 3.3 million Americans have filed for unemployment in the wake of the coronavirus. The unemployment rate has likely risen to 5.5 percent.

At this time, it is not clear exactly what the rest of 2020 will look like. Although there have been discussions of a recession – rumbles that also existed in 2019 – the situation with the coronavirus is strange and unique and we are not yet able to predict the impact. The current situation is not like the Great Recession of 2007, where some of our biggest financial institutions collapsed and others swayed on the brink of becoming insolvent. Forced social distancing has caused some businesses to struggle, but others are thriving. Likewise, some employers – especially retailers – are increasing wages for employees while other employers are issuing hiring freezes and talking about layoffs. It is also unclear what impact a stimulus package from the government will have.

We intend to keep abreast of the data and provide additional resources on compensation best practices in an uncertain economy as the situation evolves.

In the meantime, we recommend that employers who are interested in what other businesses are doing take a look at the thought leadership that Mercer is publishing on managing the workforce in light of the novel coronavirus. This includes a Live Survey on how businesses are reacting to the Coronavirus, with results updated regularly.

For employers looking for more practical guidelines regarding the health of employees and how to navigate worker safety during a pandemic, we recommend the Guidelines for Employers published by the CDC.

For now, here are some of the highlights from our 2020 Compensation Best Practices Report – with some additional commentary on how the coronavirus impacts our findings.

Retention is Still a Concern

Coronavirus - Retention a growing concern for HR

According to CBPR data from 2020, 66 percent of organizations felt that retention was a major concern for their business in 2019, which has been trending up in recent years and looked like it might only grow this coming year. It’s interesting to note that in 2009, during the last recession, only 28 percent of organizations were concerned about retention. However, only two years later, this percentage had shifted up to 47 percent, demonstrating that recessions do not last forever and that organizations that lose sight of the importance of employee retention when the economy is down are setting themselves up to struggle when the economy recovers — as it inevitably does eventually.

In addition, even in hard times – perhaps especially in hard times – every business has employees that they need to retain. Compensation planning is part of an overall retention strategy to manage employee turnover to be as productive as possible. In other words, you still want to retain your high performers and the people that are necessary to keep the business operational and differentiated in the market in order to get you through a struggling economy and into the next boom.

For additional insights, check out our article on managing turnover during the coronavirus crisis: 4 reasons employees quit and how to stop it.

Compensation Will Increase for Some

CBPR - Planned Base Pay Increases for 2020

In 2019, 82 percent of organizations gave base pay increases, with 3 percent being the most prominent increase given, which is also similar to last year. Eighty-five percent of organizations planned to give base pay increases in 2020. In addition, organizations planned to continue to employ a variety of tactics to attract and retain top talent. These include merit-based pay (60 percent), learning and development (57 percent), discretionary bonuses (34 percent), and more perks (26 percent).

Strategies to win at talent acquisition and retention will continue even if there is a recession. As previously mentioned, although some industries are issuing hiring freezes, furloughs, and layoffs, (such as airlines, hotels and entertainment companies), other industries are scrambling to hire in the current conditions (such as grocers, medical device manufacturers, and transportation companies).

In addition, highly skilled talent that can help the business thrive will remain competitive. For example, in the wake of the coronavirus, online shopping is surging for some businesses and slumping for others. Many grocers and retailers are investing in online shopping and Buy Online Pickup in Store (BOPUS) experiences where items can be pre-purchased online and brought out to shoppers waiting in their cars. This requires investment in talent with digital technology skills and other competitive skills as well as order fulfillment and delivery people and services.

The more up-to-date your compensation data, the more equipped you will be for managing offers and raises in the current economic climate for highly skilled resources. Up-to-date market data can also prevent you from overpaying in a climate where budgets may become tighter as the full impact of the coronavirus is felt. A combination of crowdsourced data and company data can make a big difference in the months to come.

For further insight, download our whitepaper on How to Build a Skills Based Workforce.

Benefits and Perks May Need Revising

CBPR HR offered Benefits in 2019 - Coronavirus

Organizations are continuing to offer standard benefits in high percentages, such as medical, dental and vision insurance (78 percent), retirement contributions via a 401K or 403B (73 percent) and accrued or granted PTO (60 percent).

More atypical benefits are also being offered and have grown in popularity. For example, remote work was offered by 48 percent of organizations in 2019. Education or tuition reimbursement was offered by 45 percent of organizations and flex-time was offered by 39 percent of organizations. Paid parental leave is also growing in popularity at 38 percent. Unlimited PTO has blossomed to 11 percent, more than double what it was in 2016.

Although some benefits may be trimmed if we go into a recession, given the impact of the coronavirus, healthcare is an essential benefit, even – and perhaps more especially – for hourly workers interfacing with customers. Paid sick leave is also an essential benefit that 24 percent of the US workforce currently doesn’t have. Some employers, especially retailers and restaurants, are stepping up to revise their benefits packages to protect workers who are at risk — or might put other workers at risk by coming to work sick because they can’t afford to stay home.

The impact of the coronavirus is also forcing millions of employees to work remotely, a situation that is new to many employers, but which may result in remote work opportunities becoming a more standard perk when the crisis is over. Research has shown that remote work results in more productivity, in part because the infrequency of meetings and social interruptions allows employees to focus on completing tasks.

Pay Communications are Essential

CBPR - Corporate Chasm 2019 - Pay Communications

In our 2020 Compensation Best Practices Report we examined the chasm between employer and employee perceptions around pay practices. The data show that employers are more optimistic about employee perception of their compensation practices and communications than employees. For example, 65 percent of employers agree or strongly agree that employees feel appreciated at work while only 48 percent of employees felt they were appreciated, constituting a 17 percent gap in perception. Similarly, 45 percent of employers agree or strongly agree that employees feel they are paid fairly (which is still less than a majority) while only 21 percent of employees agree or strongly agree that they are paid fairly, a 24 percent gap in perception.

We also asked employers to evaluate their pay brand. A pay brand is how employees and job candidates view an organization’s compensation philosophy and practices. A minority (47 percent) of employers rate their pay brand as either good or very good for job candidates and only 43 percent of organizations rate their pay brand as good or very good for employees.

CBPR 2020 - Pay Brand Perceptions

Finally, we found that only 32 percent of employers train managers on how to talk about pay with employees. We also found that only 38 percent of employers provide total compensation statements to employees. This is unfortunate since total compensation statements are a strong differentiator in top performing companies.

In times of crisis and economic uncertainty, communication is indispensable. The impact of the coronavirus is currently unknown and the way organizations respond during this time could define their pay brand for decades.

Now more than ever organizations should be engaging with employees about the current situation and making sure they understand how they are valued as well as how and why they are paid the way they are. This understanding will become crucial if pay freezes, pay cuts, furloughs, or layoffs become necessary.

To learn more about pay communications, download our whitepaper.

Pay Equity Shouldn’t Be Forgotten

CBPR 2020 - Pay Equity Analysis

Research from PayScale shows that although the gender pay gap is narrowing, it’s closing slowly with little progress made in the controlled gender pay gap in recent years. The gender pay gap was a hot topic in 2017 and continuing through 2019 thanks to the #MeToo and #TimesUp movements as well as several lawsuits brought against some big-name American companies.

Pay inequity is commonly the result of unconscious bias or outdated compensation management practices and happens even in well-intentioned organizations. According to PayScale’s 2020 CBPR, 38 percent of organizations planned on doing some kind of pay equity audit in 2020.

Despite the current crisis and the impact of the coronavirus, pay equity should remain top of mind for any organization with values steeped in fairness, transparency, equality, or integrity. Conducting a pay equity analysis can help you see whether you are paying employees unfairly along factors that are not legally compensable. It can also help your business become more organized in how you set, manage, and communicate pay. Pay equity analysis with up-to-date employee data is offered through advanced reporting with PayScale MarketPay.

Learn more about the gender pay gap and download our whitepaper on How to Advocate for Pay Equity Analysis.

Get the 2020 Compensation Best Practices Report

The 2020 Compensation Best Practices Report includes more data insights across industry and company size as well as best practices differentiating top-performing organizations. For full access, download the report now.


Amy Stewart
Sr. Content Marketing Manager at PayScale
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