Salary, term and Covid-19: Compensation in the \”new normality\”

As the powder sits on the initial interruption of the Novalect Coronavirus, it has been painfully clarified that a certain amount of financial difficulties will persist for the foreseeable future. The economic activity shrugged 33% of the last trimester, a record that exceeds even the worst period of the Great Depression. This reduction has brought with it the gloomy need to reduce the cost of human capital through dismissals, permits and payment reductions. The numbers are not precedents. The initial claims of unemployment have passed more than one million nationwide for more than 19 consecutive weeks. But even those with intact positions may be suffering. According to a study from the University of Chicago, the recession of 2008 caused only half of the number of payment cuts for workers employed. [1]

If your company faces fewer income projections or higher business costs, the reduction of theSalary spending may be necessary to guarantee long-term viability. The decision to reduce payment (or today) can be painful and should be performed with deliberation and care. In spite of options, it is important to ensure that immediate actions are aligned with the long-term expected evolution of their business environment. For example, how will the salary be saved from comparing with the cost of hiring and training a new employee? How fungible has your labor market and how could you change the possibilities of remote work to change these considerations? How can compensation layers be considered as a source of flexibility, for example, by differentiating the commissions instead of reducing the payment?

These considerations reinforce the need to align the philosophy of compensation to the corporate strategy. In more typical times, this alignment would have occurred through an analysis of the industry and the panoramaOf the competitors: For rapidly growing industries or highly competitive employment environments, the high percentage payment (and depending on paper, aggressive incentive plans), they are often necessary to ensure that a company attracts and retains the best people. The same principles are still applied, and in fact they become a source of important differentiation in the midst of the interruption of Covid-19.With a large part of the workforce now separated from a stable job and remote work that obtains acceptance Generalized, developing and maintaining a strategic compensation plan will be necessary to stay ahead of the competition. has been providing them with data and the necessary tools for companies to design, maintain and improve their compensation plans for more than 20 years. We will be happy to review how our solutions suite can Provide critical intelligenceTo ensure that your company is equipped to be successful, since the \”Normal Normal\” begins to look more and more normal.


[1] Washington Post Summary of \”Working document: US Labor Market UU During the beginning of the pandemic recession\” Becker FriedmanInstitute, University of Chicago.