- The coronavirus pandemic has disrupted fiscal year 2021 salary increase plans for 45% of employers, according to Gallagher survey results released Nov. 10.
- Of those who said the crisis derailed compensation plans, 51% said they expect to reduce salary increases, and 45% said they expect to suspend them entirely.
- "Revenue streams and budgets will be unpredictable in 2021 and for these reasons, many employers are pausing across-the-board salary increases," William F. Ziebell, CEO of Gallagher's Benefits & HR Consulting Division, said in a statement announcing the results. "However the data shows more employers are leaning into variable pay models because this allows them to provide employees with a pay increase based on performance."
Other recent research shows that workers are likely aware of the impact the pandemic will have on salaries and salary increases. Fewer workers said they expected an increase this year compared to last year, according to an August Randstad US survey.
While many employers have undertaken pay cuts as a result of the pandemic, most are determined to pivot back to salary increases, Catherine Hartmann, talent and rewards senior director at Willis Towers Watson, said in August.
Reducing or delaying wage increases is a change in strategy that differs from those adopted in the earlier stages of the pandemic. In March, Willis Towers Watson published a report showing that many North American employers implemented hiring freezes, while wage freezes and delayed raises were less common. A month later, an analysis of Securities and Exchange Commission filings by Gallagher found public companies had implemented pay cuts; 66% of those in the analysis that made pay cuts said the changes were either "temporary" or "indefinite" in nature. Other evidence showed some employers made salary cuts that, in many cases, have not entirely been offset.
There are benefits to employers in holding onto cash. Conserving funds and delaying increases preserves employer flexibility, Mercer, a human resources consulting firm, told HR Dive in April. But companies should consider evaluating potential compensation and benefit actions that can be taken later to improve cash flow. If employers can achieve a balance between economics and empathy during the pandemic, they can expect to see loyalty from workers, candidates and customers, the firm noted.
There may be options beyond compensation, too. "Employers of all sizes are beginning to realize pay increases aren't the only levers they can pull to attract and retain employees," Ziebell said. "Oftentimes, customized benefits and compensation strategies can reduce operating expenses and, at the same time, better cater to employees' physical, emotional, career and financial wellbeing."