‘Unusually uncertain’ was the term used by Andrew Bailey, the Governor of the Bank of England, to describe the current outlook for the economy; a term many of us can relate to currently, particularly those of us working in HR. The question over whether to make short or long term changes to reward strategy is a question facing many HR and Reward professionals during these unprecedented times. There has been a lot of talk over the last few months about when things will get back to normal but how likely is it that things will just go back to the way they were, either in the short term or the long term? 

In a REBA survey conducted back in May, 29% of respondents were already saying their organisations future after COVID is unclear and 35% reported plans to expand or launch new parts of their business. Whether organisations are being impacted negatively or indeed positively due to COVID, the short-term circumstances cannot be ignored but the general consensus is that COVID will also result in longer lasting change, and therefore “going back to normal” won’t be possible for any of us.
When it comes to reward, for some organisations it will be necessary to review and amend the composition of reward packages and the metrics around some elements of reward, but the underlying strategy will remain consistent. There may be a need to amend absence policies or set interim measures for bonuses but the strategy, whether it be rewarding for performance or promoting a “one team” culture, doesn’t change. 

For some organisations, the need to make short term changes in reward practices is providing an opportunity to review the long-term strategy. Many businesses have seen positive acceleration of change due to COVID, whether that be remote working, the development of new services or changes in customer behaviour and are therefore utilising those changes to also accelerate change within reward. It can be easier to review your sales bonus plan when changes in customer behaviour is driving changes within the sales process. It can be easier to review the appropriateness of LTIP’s when they are under water rather than performing.   

COVID has also reopened the debate on how we value and reward roles within our society. The last few months have seen Executives take voluntary pay cuts, wealthy business owners criticised for furloughing lower paid employees and some businesses paying top ups to employees now deemed essential workers. There is a growing call for these short-term changes to lead to longer term change, to address some of the imbalances and inequalities seen in how we reward different roles within our society. This provides an opportunity for businesses to differentiate themselves within their market.

For other organisations, a significant change in business strategy and operating profits means regardless of the long term, short term changes are unavoidable. If an organisation is fighting for survival it can be easy to forget strategic plans however a strategic plan that accounts for different long term scenarios can help make short term decisions that do not impact the businesses ability to take advantage of the situation when the economy improves. When short term change is unavoidable organisations will still need to be cognisant of the longer-term impact and look at ways to mitigate any negative consequences. It is possible to limit the negative impact of difficult decisions a business has to make, short or long term, if they are handled with compassion, clarity and transparency.

Ultimately there won’t be a one fix fits all approach to how we tackle reward as we navigate the impact of COVID; some businesses will need to focus on short term changes, for others it will be about long term change. There is no rule book on how to handle a recession brought about by a global pandemic. There are so many variables still in play it cannot be assumed that what has worked in previous recessions will work this time. HR and Reward professionals will need to understand the specific circumstances of their organisation to determine how best to proceed and maintain an agile approach as the situation evolves. Organisations will undergo change of differing degrees, some positive, some negative and reward and benefit strategies are going to need to be flexible and agile to support the changes. Uncertainty will bring with it an inevitable feeling of instability meaning employee wellbeing will remain a key concern for businesses, whether that be health related wellbeing due to the ongoing threat of COVID or financial wellbeing due to the lack of stability in an unpredictable economy. 

Just as there will not be a “one size fits all” solution for organisations, neither will every employee feel the impact of COVID in the same way. Providing a benefits package that enables employees to access the support they need when they need it will be important to maintaining engagement and productivity. If left unmanaged, feelings of uncertainty can breed fear. Companies who treat their employees like adults and take the time to be open and explain what is happening and why, will build trust which is extremely valuable in maintaining an engaged and stable workforce. Therefore the question shouldn’t be whether to shape strategy around the next 12 months or five years, rather organisations should ask themselves how can we balance what we need to do in the short term without damaging what we will need in the long term to build the business back up. Employees who feel badly treated may remain in the short term due to lack of alternative options but longer-term, business who focus purely on the short term and ignore the long term impact may find themselves struggling to retain and attract the best talent while their competitors thrive.

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