June 30, 2020
This changes everything! Or does it? In the midst of the Coronavirus pandemic, with U.S. and global economies in free fall, businesses are asking, “What will this do to the employment market as we navigate through and beyond this crisis?” It’s a reasonable question. Unfortunately, it’s a reasonable question with no easy answers. A question with many moving parts. A question that begs additional questions.
So, how can you begin to put things in perspective and zero in on possible answers for your industry, your market, and your company? Let’s look at some key factors:
The Really Big “Big-Picture” Question:
Before focusing on issues and questions that affect individual businesses and industries, let’s acknowledge the big-picture employee market question:
Will today’s pandemic crisis economic conditions transform the employment market into one that favors employers or workers? In other words, who will have more power to influence and set compensation, benefit and workplace conditions – employees or employers?
The short answer is that it’s too soon to tell. Historical and near-term indicators say it could go either way. In recent years, with unemployment levels extremely low, employees generally have had the upper hand. Now, however, with pandemic-influenced unemployment at post-Great Depression record levels, will employers turn this to their advantage, making it difficult for employees to demand certain levels of compensation and benefits?
According to a recent USA Today article, with widespread joblessness expected to last an extended period (a year or more, perhaps), high unemployment creates a strong headwind against worker power, according to Jed Kolko, an economist at Indeed.
The longer answer is that there are many smaller factors in play (more about those later). “Essential” workers, for example, might be able to exert more influence in the near term. So will highly skilled or specialized workers in industries that are thriving despite (or perhaps even because of) the pandemic. The strength and duration of the economic downturn will also play a major role in how the employment market shakes out.
Ultimately, the most important answer to this question depends on your industry, your market, your competitors, your business, and the type of workers you’ll need to use. When it comes to the economic landscape, staffing, compensation, and attracting and retaining top talent, only you can identify and address the key issues to navigate the coming employment market.
Key Issue #1: Economic Landscape
For employers, is this a short-term economic disruption, a longer-term one, or a “new normal” economic reset?
Again, the answer will be specific to your business. Rebecca Jarvis, Chief Business Correspondent for ABC News, recently stated that 70% of economic stability and growth is tied to consumer spending. With that in mind, the federal pandemic economic response has tried to encourage consumer confidence and spending. Stimulus payments and unemployment bonuses, for example, have attempted to support continued consumer spending.
And while many businesses have failed or are in danger of failing, “some companies that are part of the ‘essential’ economy are rushing to hire new workers, which may temporarily give current staff some bargaining power,” according to USA Today. However, this condition appears to be the exception.
Key Big-Picture Questions for This Issue:
- Is your business closely tied to short-term consumer spending?
- Is your business part of the person-to-person service economy?
- Or is your business part of the information-based economy where workers can work from home?
Additional Considerations for This Issue:
- Will “essential” front-line workers expect increased wages? For example, in restaurants, customer service organizations, manufacturing facilities, etc., will workers demand “hazard pay” or “hero pay” for working long hours or directly with the public? Will we value these typical entry-level roles more in the future?
- If you are in a hospitality or service industry, will servers now get higher hourly wages? Will you eliminate tipping or share tipping across all employees?
Key Issue #2: Staffing
How can you determine the right staffing levels during and after the crisis?
With revenue falling for many businesses, staff cuts may be necessary. But how can you balance current and future needs? What do you risk by reducing staff today that you will need again in the future?
Key Big-Picture Questions for This Issue:
- Will you need as many staff members in a weakened economy when revenues may fall?
- Will workers want to return if they have lingering concerns over personal safety amid continuing health risks?
- Will workers want to return while making extra money on unemployment?
- Will you need to offer voluntary retirement because you will now be overstaffed for the amount of work and revenue you have?
Additional Considerations for This Issue:
- Will you need to incentivize employees to return to work because they are making more on unemployment or are nervous to return?
- Will you need to use retention incentives to keep your top talent as they are being poached in the current environment?
- Will you need to be creative in scheduling and allowing employees to work from home to accommodate potential school schedules this Fall?
Key Issue #3: Compensation and Workplace Culture
How will changing economic factors affect near-term compensation policies, HR programs, and the overall workplace culture?
In a dramatically different economic landscape where the nature and levels of staffing have been impacted, what changes will you need to make to your workplace and compensation policies as you adapt to the “new normal”? Seemingly for decades, workplace experts and futurists have predicted the rise of home-based workers. The Coronavirus pandemic could finally lead to a significant adoption of work-from-home policies and processes. Compensation policy changes could be significant as well.
Key Big-Picture Questions for This Issue:
- How will the crisis alter the employee culture and compensation landscape?
- Will more employees demand to work from home? Can you reasonably accommodate this demand? And if you can, will overhead cost savings enable you to compensate workers at a higher level?
- How will you accommodate employees who continue to have day care issues? Will you need to terminate top performers because of this?
Additional Considerations for This Issue:
- Did you distribute incentive/bonus payouts at the beginning of the year?
- If you haven’t paid out on your incentive plans, can you still afford to do so? What if you can’t? What is your liability if you can’t make those payments?
- Are these pre-pandemic plans still in place? Will you need to revise them moving forward to be fair to workers in light of drastically changed economic realities?
Key Issue #4: Attracting and Retaining Top Talent
What types of workers will you need to remain competitive and profitable moving forward? How will you attract and retain them?
According to a recent report by The Brookings Institute, “The likelihood that workers will retain their relationship with employers throughout the pandemic … will be crucial to how quickly the economy recovers.” But employee retention is challenging in the wake of staff reductions. This is an especially critical concern for employers when it comes to top talent or essential workers. A recent snapshot showed that “…15% of workers who report being laid off as a result of COVID-19 say it is unlikely that they will return to their job after the crisis is over.”
Key Big-Picture Questions for This Issue:
- Will your top talent remain loyal once the economy stabilizes? (Truly top talent can always secure a new position even in an “employer market.”)
- Do you know if your wages are competitive for top talent?
- With fewer employees in the market (due to unfortunate COVID-19 deaths or pandemic-related conditions), will your organization be able to find and recruit the talent you need?
- During the crisis, did you retool your business and now need different talent than before?
- Can your organization easily integrate the use of “gig workers” in lieu of full-time employees?
Additional Considerations for This Issue:
- Which employees will be most important to attract and retain? (These typically include executives, middle managers, individual key contributors, and those with essential skills that really drive the business.)
- Have you identified essential workers and top talent at each level of the organization?
- What will it cost you to retain these workers?
The Bottom Line:
Will the coronavirus pandemic turn what has long been an employee market into an employer market? With so many factors in play and so many real-time shifts in those factors, it’s simply too early to tell. Nonetheless, by taking a closer look at your industry and competitive marketplace, you can begin to see how those factors will affect your organization in the short and long terms.
Regardless of the duration of this or any similar economic event, employers must rapidly adapt to be among the marketplace survivors. The rapid shift in where we work and how we work will necessitate new approaches to the workplace culture, as well as methods of attracting, retaining, and compensating workers. Tried and true compensation programs that once may have required only modest updates year after year may now need to be substantially overhauled. At the very least, contingencies should be established for the “new normal” that is likely to endure after the crisis.
If you need help adjusting to the new norms during and after an economic crisis, including implementing crisis compensation plans, contact us today at 317.589.8529.
Cassandra Faurote
About Total Reward Solutions:
Total Reward Solutions is your trusted partner for compensation services. Led by Cassandra Faurote, professionally certified Compensation and Human Resources expert and author of the book Compensation Sense 101, Total Reward Solutions offers a broad range of compensation and total rewards consulting services to help your organization attract top talent, motivate employees and retain top performers. We can partner with you on a project basis, on retainer, or as your total outsourced solutions provider for compensation services.