Written by
Ruth Thomas
Senior Consultant and Co-Founder, CURO
LinkedIn

05 October 2020

You may have led many compensation reviews over the course of your HR career, but during the days of the Coronavirus crisis, things are very different. Your organization has probably been working remotely for months now - a new and challenging situation for all. How do you begin to approach your workforce’s compensation and review planning at such a demanding time?


In this blog, you’ll learn how to:

  • Prepare for compensation review season during a time of business uncertainty using technology
  • Adapt pay review processes to account for cost constraints and the need to do more with less
  • Lead a remote compensation review process that engages both managers and employees
  • Communicate pay decisions openly and with transparency

The Top 4 Compensation Review Challenges of 2020

According to a recent PayScale survey, 73% of leaders don’t feel “very confident” in their managers’ ability to have tough conversations about compensation with their employees. This is in part because many bosses lack the data (such as performance, employee history, and job band pay ranges) they need to have effective conversations, it’s also a result of the growing business challenges we’ve been seeing develop alongside COVID-19.


Using technology to inform and manage your compensation reviews removes the hours and strain of old school processes and provides real-time access to the necessary information, empowering managers to make fair compensation decisions - especially when tackling the challenges that have emerged from the Coronavirus pandemic. How? We’ll explain.

 

The top 4 compensation review challenges of 2020 and beyond include:

  1. Business uncertainty and transformation
  2. Cost and budget constraints
  3. Flexible and remote working environments
  4. Pay fairness and wage equality concerns

 

Business Uncertainty and Transformation

We’re still in the middle of dealing with the Coronavirus pandemic and the final outcomes remain far from clear. Many fear a second wave and further lockdowns. With so much uncertainty, figuring out “what’s next” for employee bonus and salary budgets requires a multi-scenario planning approach. At the moment, we’re seeing many organizations still hedging their bets when it comes to commitments to pay and bonuses.


How Compensation Management Technology Helps

Increased use of modelling scenarios

Some of our clients dealing with this situation are using increased scenario modelling in our solution, including different percentage increases for salary/merit review spend.  We’re also seeing the use of models for bonus percentage payouts to determine the bonus pot available. Additionally, clients are wanting to understand the ways to minimize impact on potential bonus payments next year, where employees have taken a temporary reduction in salary due to COVID-19. What this means in practice is that there could be a different salary used for bonus payments next year than has actually been received during the year and they want to include that in their projections now.

Realigning incentives

On top of modelling scenarios, many are looking at realigning incentive plan structures  such as addressing invalid thresholds, adjusting KPIs set at the beginning of the year that won’t be met, and in some cases, shorter incentive plan measurement periods.

When it comes to looking at performance during this phase some are considering other actions demonstrated by employees such as behavior in response to safety adherence, a display of company values while under pressure, or the ability to acquire new skills that have brought real value to business performance at this time. These can all be recognized through compensation, even on a discretionary basis if not part of a formalized plan.

Managing last minute changes

You need a solution that makes last minute configuration easy, one that can handle last minute budget changes or changes in incentive plan measurements or even award plan eligibility. This allows control right up to the go live date and definitely reduces stress. 

Want to hear some of our CURO compensation specialists walk through these challenges with client use cases? Follow along in our recent on-demand webinar. 

Cost and Budget Constraints

Cost constraints are not surprisingly a major feature of this year’s reviews, due to the economic impact of the pandemic so far. It’s crucial to adapt pay review processes to account for lower budgets and the need to do more with less.

That being said, the last recession saw many employers slip into a “peanut butter approach” to pay allocation - meaning they spread compensation money evenly across all employees. But if you want to retain key talent, it’s best to avoid this and reassess who is paid what and who should get prioritized when it comes to allocating pay budgets. Companies we work with are getting creative.

How Compensation Management Technology Helps

Decreasing or delaying pay and bonuses

We introduced the ability to use salary decrease functionality, something that was never a previous requirement, for clients to use where pay budget reductions are needed. Clients also use eligibility rules for salary review with a proportionately smaller population being eligible, in order to decrease spend and ensure that where there are limited budgets, they are allocated to those employees that are contributing the most value.

curo-comp-management-screenshot-1Screenshot of custom alert to help client work with reduced budget in CURO Compensation Management software

There’s also a number of teams delaying pay reviews and pausing planned bonuses - or just targeting specific market adjustments rather than a general merit raise. Those that are going ahead are making extensive use of alert notifications and budget control. Compensation management technology allows reward principles to be enforced much easier with configurable rules, constraints and alerts which ensure users work within their reduced budget.


Flexible and Remote Working Environments

Working from home has been the big story of 2020. In the UK and the US, only about 35% of employees have returned to the office (compared to mainland Europe where the numbers are much higher). Tech giants like Facebook, Google, Twitter and Microsoft announced that they would move to permanent home working. This means many of us will be managing a remote compensation review process this year.


How Compensation Management Technology Helps

Keeping data secure

A key focus for companies leading remote reviews is data security, so ensuring critical compensation data is kept secure and the right people have the right access to data through management hierarchies works a lot smoother than having spreadsheets scattered across team drives.

Providing real-time analytics

Increasing insights with interactive dashboards, charts and reports, means teams are able to see the impact of reward allocation before submitting - preventing unnecessary moderation in the post-review phase. Managers can also make the most of their real-time data all in one place as key decision-making support.


curo-comp-management-screenshot-2Screenshot of charts on dashboard to help client see their reward allocation impact in CURO Compensation Management software

Delivering compensation letters safely

And then, when the reward team is ready to share the compensation updates with the rest of their employees, they can send personalized compensation letters as emails or downloadable PDF files to make sure all employees understand how their pay was determined. We won’t be in the office to pass letters around this year, so using compensation technology makes sense.


Avoid Bias and Set the Right Tone for Remote Compensation Reviews

With your employees working from home, your remote review approach calls for more flexibility and compassion. While some juggle work calls with hyper children, others may be managing projects while caring for elderly parents. There are also team members trying to work a full day while feeling isolated and alone.

To help you avoid bias during your compensation decision-making and reviews, keep these situations in mind and use data and colleague feedback to back up your actions. This way, you can celebrate high-performers to boost morale and talent retention, and avoid tracking down underachievers without knowing their daily dealings. And yes Zoom fatigue is real, but for these conversations, video is personable. Stay open-minded and friendly - and even if you think you’re giving good news, be ready for an emotional reaction as these are loaded conversations.


Pay Fairness and Wage Equality Concerns

Lastly, pay fairness and wage equality have emerged as huge reward themes recently - first during the pandemic when we saw those we came to rely on as key workers being the lowest paid, and then second with the reemergence of the Black Lives Matter movements in June, seeing a renewed focus on ethnicity pay.

We were working with many organizations who started 2020 with good intentions and plans to prioritize pay equity audits - then Coronavirus happened and the focus turned to other reward issues. What’s interesting to point out now is that teams across industries are getting pressure from stakeholders and society to provide data on the state of pay equity across their organizations. And as soon as possible. For example, San Francisco startup Buffer, is hoping to drive change through sharing unadjusted numbers and tackling their own gender and ethnicity pay gaps.


How Compensation Management Technology Helps

Displaying pay fairness in seconds

Some of our own clients are tracking performance rate distribution or average salary increases by protected category groups as well as seeing average pay gaps calculated with real-time analytics. This is much easier to do during the compensation review rather than relying on moderation and push back after recommendations have been submitted. Some have even created a specific pay equity adjustment budget pot as a result of pay equity analysis and configured it as part of their salary review.

curo-comp-management-screenshot-3Screenshot of client's gender and ethnicity pay gap analysis results in CURO Pay Equity software

Using pay equity software

Organizations that are looking for their own pay gaps and pay equity trends on their teams are turning to pay equity technology that makes analysis fast. Software like CURO Pay Equity, allows teams to choose what employee details they want to compare, and the platform will do the rest by calculating the cost to close pay gaps and providing recommendations to where spend should be targeted to have maximum impact.


Final Thoughts: Understanding the ROI of Compensation

While there is so much we don't know in terms of how the Coronavirus crisis will play out, we do know that economic uncertainty will impact many businesses for the foreseeable future. Across organizations, we are having to learn to do more with less. Now more than ever, understanding what your employees value most from their reward package is critical. With the changing world and recent events of this year, there’s been a growing movement towards humanizing organizations - through emphasis on empathy, diversity and inclusion, well-being, and open communication. Employees aren’t just “human capital” so with this in mind, we can anticipate the need to incorporate more flexibility into how we apply compensation. For many changes introduced during this year’s review season, will be a launch pad for future transformation beyond 2020.

 

data-reporting-charts

Want to see how you can use CURO Compensation Management software?

Book a 1:1 demo with us.