The Pandemic and Pay - What do you need to consider for 2021

I have been asked several questions on pay and employee motivation given the impact Covid-19 has had on businesses in 2020. These include:

1. How will remote working affect employers' pay decisions?
2. How do you keep employees engaged if you can't afford pay rises? (Especially if they were expecting a pay rise or promotion before the outbreak); and
3. How does the pandemic change the career progression companies can offer?

So what can you do in these situations?

Q How will remote working affect employer's pay decisions?
A In theory if an employee is delivering the same quantity and standard of work, whether they work from the employer’s premises or from home, it should not play a part. But I am aware that some employers are factoring employees’ savings on travel costs into their thinking for future remuneration structures. Many employees will not see this as fair because it is for them to decide when they apply for a job how much they are prepared to pay (both in time and money) for their travel to and from work. Instead, they will be incurring additional heating, electricity and other domestic costs as well as having to set aside space at home for their home office and provision of appropriate furniture and equipment. Remember that each employee’s situation is different. It will vary from those who perhaps walk or cycle 20 minutes to get to work (and therefore not incur significant commuting costs or time) to those who may travel over an hour and have an annual train ticket. Some of this may be paid by the employer or accommodated through reduced tax liabilities (only available if it is the employer that requests home-working, not the employee), but the situation is more complex than it may first appear.

Q How can firms embrace remote working to widen their talent pool?
A Where businesses advertise new roles as open to remote working for some or all the time, this will open up the pool of potential applicants significantly as the geography and commuting time will not be so much of a barrier for some people. The remote-working option will need to be highlighted in the job adverts so that it is not filtered out when those searching for new roles look at vacancies online.

Q Do pay and remuneration plans have to change to reflect the need for more agility?
A They do not have to change but employers can be creative about this and reward the different working arrangements – perhaps by introducing allowances. However, they need to be careful that they do not indirectly discriminate by putting in a policy that is likely to be less favourable to certain groups of employees such as women. This is because in our general population, women are more likely to prefer to work from home for childcare or other caring reasons.

Q How do you keep employees engaged if you can't afford pay rises? (Especially if they were expecting a pay rise or promotion before the outbreak)
A At the moment, many employees are simply grateful to have a job, but this feeling will wear off as we go through 2021. They will feel that they have put up with a lot of inconvenience over the last year – whether that is because of pay cuts or furlough arrangements and so they will be expecting some form of recognition for their efforts and support. Therefore, even if the business has not got the capacity to fund across-the-board pay rises, it may be able to look at other benefits that do not cost as much, but that are still valuable to the employees. This could include benefits such a cash health plan or introducing life assurance cover in recognition of their efforts over 2020.

Q How does the pandemic change the career progression companies can offer?
A Business plans for many employers will have changed drastically because of Covid-19 and so it may delay plans for employees’ career progression. To keep employees engaged it is important that employers are honest with their staff about their plans and how things have been affected – either in terms of timing of promotions or training, or of the business strategy as a whole. It will not be sufficient to carry on “fire-fighting” but will be important to review the company’s longer-term plans and revise their succession plans. Of course, some employers have diversified into new areas or work as they have adapted to the challenging trading situation of 2020 and this may open up new opportunities for staff that had not been foreseen originally.

If you have other questions on the subject for your business that you would like to discuss, please get in touch.
Posted on 14 Dec 2020
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