In an unexpected crisis, companies of all sizes are scrambling to protect their employees and keep their businesses operating. With so many competing priorities, it's easy to let the focus on pay equity drop - but this could lead to major legal, and reputational backlash once the pandemic settles.
The positive? The Coronavirus pandemic provides an opportunity for companies to set themselves apart by prioritizing pay equity and embracing a diverse culture that builds trust and transparency with their current and future teams.
In this blog, Ruth Thomas, Co-Founder and Senior Consultant at CURO and Jennifer Peacock, Principal at Innovative Consulting Services, answer your questions from our recent webinar, about preventing setbacks for pay equity at your own company during the crisis, and the importance of updating your job descriptions and pay structure to reflect new working conditions and job responsibilities.
The Impact of COVID-19 on Pay Equity In Organizations
Q&A with Ruth Thomas, CURO
40% of companies are continuing with pay equity analysis as usual during the Coronavirus pandemic.
(Numbers based on webinar survey of 150 attendees involved in their company HR practices)
How do companies ensure that the pay equity gap for minorities and women, who are more adversely impacted by the economics of COVID-19, isn't broadened?
Many employers are putting pay freezes or salary reductions in place to align staff costs with reduced business activity. But, just as you would monitor pay increases by protected category during a compensation review, you should also monitor pay decreases in order to ensure a fair distribution and monitor for unintended bias in those decisions.
These salary re-levelling exercises also provide an opportunity to address and potentially remediate pay inequity. Some commentators are saying this an ideal opportunity to close the pay gap forever – so maybe consider not reducing pay for those who may require pay equity remediation. I think the reality has been that those who have enacted pay cuts during the crisis phase had to do this so swiftly, that taking an across the board approach – scaled by seniority – seemed like the fairest approach. However, we will continue to be in a cost-constrained environment so it will be great to have pay equity analysis available to factor in cost reduction exercises.
Is there a risk of seeing a disproportionate number of women furloughed or RIF from COVID-19 circumstances?
Due to female representation in sectors and jobs most impacted by the economic consequences of the COVID-19 lockdown, there is a likelihood there will be a disproportionate number of women impacted. In some instances women are also opting to take furlough or reduced hours in order to balance caring responsibilities. It is important for all organizations to monitor selection processes to ensure decisions made are fair and now subject to any unintended bias.
What do you predict the impact of Coronavirus will be on gender pay reporting?
In the UK, the Government Equalities Office (GEO) and the Equality and Human Right Commission (EHRC) have suspended gender pay gap reporting regulations for this year due to the COVID-19 pandemic, although many employers (50%) have elected to upload their data for the 2019/20 reporting year. More generically, demographic shifts in headcount will impact gender pay gap reporting (or any pay equity analysis), particularly if you see large numbers of protected category employees exit the organization or take furlough. Therefore, it is critical to analyze both your pre- and post-crisis data to see what impact these changes have had.
What can we do to progress on gender pay equity when merit increases and bonuses are frozen due to this pandemic?
Lack of pay equity is always a risk - both from a litigation standpoint and an employee engagement perspective. As with any business risk, it’s imperative to understand the quantum in order to make an informed decision on whether or not to prioritize remedial action. So while businesses may not be allocating funds for compensation increases, deciding whether to address pay inequity is more of a risk assessment exercise.
What changes are you seeing in how new hires are being compensated? Does the changing supply/demand ratio for talent have compensation implications?
In terms of immediate impact on new hire compensation, many employers have hiring freezes in place, with the impact on market rates playing out over the next 12 months. For those sectors currently impacted most by job loss or furlough, we will no doubt see a realignment of wage rates as labour supply exceeds demand. Actions by employers to reduce wages will also have a part to play here, but there are also some sectors who have benefited from the crisis who may be able to afford to pay more lucratively to attract key talent.
What are the compensation trends after COVID-19?
We will undoubtedly be back to managing reward in recession which is slightly depressing when you consider that real wages only recovered in the last 12 months from the last recession. Pay budgets will be reduced and managing pay differentiation will again be a challenge, but this is critical for retaining your key talent. Enforcing strong governance over pay budget spend will also be key.
Additionally, the principles of pay transparency will become even more important. The last recession had a corrosive impact on employee perceptions of reward fairness and equity. Pay freezes, redundancies and disclosures about bankers and executive pay all had a negative effect. The same will apply now and employers will have to work hard to regain employees’ trust and confidence. We will be back to an environment where employers will have to communicate more openly about how limited pay budgets are distributed in order to retain key talent.
We will also have to do less with less. We can only do this by simplifying and streamlining processes. Some leading organizations are already planning for this – activities that were dropped during the crisis may not get started again. In HR, we will need a keen focus on key business priorities and how we can support them leanly. This provides an ideal opportunity to leverage technology.
How do you ensure pay equity at a time like this?
Economic forecasters are predicting that the financial consequences of the COVID-19 crisis may be comparable to the Great Depression. Some forecasters have also expressed concerns that the crisis will have a disproportionately negative effect on women - impacting pay equity and gender equality in the workplace. With that being said, many HR teams are likely in the process of making the difficult decision to reduce employee salaries, and lay off or furlough employees. There are steps you can take during this time to reduce the economic effects on women and prevent this crisis from derailing your company’s progress on pay equity. We dive into this further in our on-demand webinar and blog.
How do you think the contracting economy will impact pay? Is it likely that pay growth will also contract as the unemployment rates potentially increase to levels not seen since the 1930s?
Many employers have reduced pay to align staff costs with reduced business activity. While the hope is that these reductions are temporary, for many businesses, the reductions are likely to be permanent. This on top of increased unemployment will likely lead to a realignment of pay rates and as with the last recession, most likely a return to negative wage growth.
The Impact of COVID-19 on Pay Equity In Organizations
Q&A with Jennifer Peacock, ICS
78% of companies have not thought about the need to update job descriptions during the Coronavirus pandemic.
(Numbers based on webinar survey of 150 attendees involved in their company HR practices)
How do we market price jobs in a rapidly changing environment (eg. recession)? If I hire a new employee in today's market, they will be brought in at a lower salary than an equally experienced (education, background, etc.) employee that was hired 6 months ago. I can't afford to hire new employees at the rates of "BC" but now face a potential inequity situation with hires made "AC".
Because salary survey data is already on a 3-6 month lag, I do not foresee sudden changes in the data itself. However, as jobs change, so will job descriptions and those revised JDs should be used to re-evaluate where positions stand against the market. I do recommend staying tuned into your internal recruitment team on what they are seeing in the market in order to make appropriate adjustments. Internal equity is certainly something to consider when making offers. I think we will see a slowdown regarding merit increases, adjustments, and promotions which will bring more tenured employees in line with new hires over time.
Some of our job roles have changed through the crisis and we want to make these changes permanently. What is the best way to do this legally as it is a quite substantial change to responsibilities in some cases?
In the US, “at-will” employment allows an employer to terminate an employee at any time and an employee to resign at any time (with some states having certain limitations in their legislation). Outside the US, it is more common to have employment contracts that must be reviewed closely to determine what can legally be changed in the role. I would recommend a consultation with an employment attorney on those concerns.
What are the 'best' methods used for job mapping and marketing pricing? Are many companies reducing staff salary to support business growth?
You will want to start with a solid job description and use the information in the JD to map it to survey positions. You will want to stay away from using the job title alone since organizations title jobs differently. Rather, use the information in the essential functions/primary responsibilities section and then figure out the appropriate level of the job using education and experience.
I have seen both ends of the spectrum, where employers are growing during this unprecedented time and others having severe financial issues. Overall, the service and hospitality industries have been disseminated and it is to be determined as to whether there will be a rebound or not. The key is to see how long it takes to fully open our countries and for people to feel comfortable being in public places or spending money.
What job description systems do you recommend? I’m also very interested in ensuring pay accuracy by reviewing both job mapping and market pricing. Do you have processes or templates you can share about this?
I really like JDXpert. They quickly reacted to changes due to COVID-19 and released some great features allowing for tracking of which essential functions require an employee to be in the office; remote work acknowledgements; temporary changes to essential functions, education, experience, qualifications, physical requirements/working conditions which can easily be turned off and on; the ability to add additional requirements temporarily; and reporting capabilities on all of these new features.
As far as job mapping and market pricing, I do not have general templates to share because the approach is specific to each employer reviewing the changes to the job descriptions and re-evaluating the revised job description against whatever survey data your company utilizes.
Are certain skills and specialisms likely to attract an even higher premium in the post COVID-19 employment market or will we see general wage depression?
I definitely think we will see some “hot skills” come out of this situation, especially in the tech industry. We have become more reliant on our networks and technology in general, so I think we will see the need for that skillset become even more critical and certifications in that area become even more valuable. Healthcare jobs will also see premiums with a large amount of burnout and employees leaving the industry due to a fear of contracting diseases while helping patients.
Does the "and any other duties" line in a JD cover us for any future pandemic?
I actually stay away from that phrase in job descriptions and ask my clients to provide specific details. If your job requirements change, you should update the job description and then review it against survey data. Online job description software makes it very easy to share those updates with employees and even have them acknowledge any changes. I am a huge fan of JDXpert if you are in the market for job description software.
We may need to make a number of people redundant who are currently on furlough leave. How do we do this? What about consultation while I furlough?
I know the “rules” around these situations are different across the globe. If you have employment contracts in place, I highly recommend working with an employment attorney. In the US, there is much more flexibility around layoffs/furloughs because of “at-will employment” legislation.
I’m interested in capturing job description changes that reflect any new behaviours if more employees are working remotely. Pay impacts not as much of our organization as it is part of a collective pay negotiation with wider civil services, but I’m still curious to hear from a wider perspective.
I would recommend having employees acknowledge your remote work policy and that can even be done as part of the job description. Online job description software, JDXpert, recently added that functionality. Additionally, any changes to the essential functions or primary responsibilities should be updated if they have increased or have been reduced. I am also seeing changes to the physical environment and working conditions with remote work, which should also be adjusted.
Should those that regularly want to work from home 2-3 days per week receive less in PTO than those who come to work every day? This is the current discussion we are having in our organization.
I’m hearing from my clients that they are witnessing employees working longer hours and being more available while working remote. Clients that previously preferred employees work as a team in an office environment have been amazed at the level of productivity and the collaboration amongst colleagues. Therefore, I am hearing more concern around burnout and ensuring employees take breaks rather than limiting time off.
Many jobs are being performed remotely right now. When businesses allow people back into brick and mortar buildings, will job descriptions need to be updated to specify if it is still essential to have an employee work at the office versus at home? What happens if an employee "refuses" to return to the building and can prove their productivity remains constant?
If working in the office is a requirement of the job, it should be indicated on the job description. If an employee decides to no longer meet that job requirement, their employment would be at risk. With that said, I think employers need to be careful about what they consider requirements of the job because this pandemic is something we have never had to deal with during most of our lifetimes, and it is reasonable for employees to have concern about being in environments with large groups of people. Therefore, I would consider if being in an office is a requirement in order to perform the essential functions of the job. If an employee expressed concern, was “forced” to come back to the office and then contracted Coronavirus, you could see a lawsuit coming your way.
I would like more information about what kinds of things need to be updated in employee job descriptions and also how working remotely could potentially affect their pay equity, job responsibilities, and compensation for hazardous environments as it relates to their safety?
You want to update your job descriptions with any differences in employees’ day-to-day work (essential functions/primary responsibilities), supervisory responsibility, financial responsibility, physical demands/working conditions, competencies, etc. Anything that is now different than before. This should be done during “normal” working conditions but especially relevant right now. If remote work has changed your employees’ jobs, job descriptions should be updated. I also recommend that employees acknowledge your remote work policy to ensure everyone is on the same page regarding expectations.
States like MN have a new Wage Theft Legislation that requires an employer to notify and the employee sign off on documenting changes to the employment relationship. Having agile job descriptions can be a good strategy, however, this legislation can make that a burden. Thoughts on this?
We are seeing more and more states in the US enact legislation that are state-specific, making it more and more difficult for national or international employers to manage employees spread across many locations. Online job description software, like JDXpert, makes these notifications easier. Their online JD software gives you the option to make job descriptions available for employee viewing (and even offering editing suggestions) 24/7. It also has functionality for employee acknowledgement of job descriptions which can be critical in the case of a lawsuit.
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With all of the answers to your questions on how you can move forward with pay equity, why not use this as an opportunity to differentiate your company? Learn how CURO’s Pay Equity software solution can help you analyze and resolve pay gaps within your organization, and prove your commitment to fair pay. Contact us to learn more.