Skip to content

Turn on a dime: how to model, plan and execute new rewards strategies

COVID-19 has caused companies to pivot in every aspect, including making on-the-fly adjustments to total rewards strategies. With the stakes high and time short, planning these strategy changes is challenging, and implementing them efficiently can be equally taxing. The good news is that technology can help greatly with both tasks.

Major disruption to compensation programs globally

In April 2020, a survey by global consultancy Aon found that 32% of companies in North America and 35% in Europe were postponing or cancelling salary increases; 17% of North American companies were reducing base pay, voluntarily or involuntarily; and 10% were reducing bonus payouts, voluntarily or involuntarily, with similar numbers in Europe and APAC-MEA.

Many companies with front line or essential workers during the pandemic at the time of the survey were providing COVID-related premium pay programs, sometimes referred to unofficially as hazard pay: 18% of firms in North America, with another 15% considering doing so, with 12% and 13% respectively in Europe. Overall, 48% of non-essential companies in North America were making some adjustment to compensation.

Sales compensation also has been significantly affected. Aon reported that 30% of companies globally had enacted or were actively considering or developing temporary incentive earnings (i.e., variable at-risk pay) protection to their sales forces. Nearly half of all companies with sales incentive plans were implementing or considering changes to those plans: 10% had made some kind of change to incentive thresholds or payout curves, with another 36% considering such changes.

Planning and executing reward strategy changes

With all this sudden disruption in compensation strategies, HR Comp & Ben and sales compensation teams have had to scramble to model, plan, and execute the needed changes. And, when the crisis eases and normalcy returns, much of the work will have to be undone to return to standard compensation practices.

How can all this change be handled efficiently? It certainly can be a nightmare if you are working with spreadsheets and manual processes or systems that lack flexibility and ease of change. Now is the time that an automated system can be a lifesaver. To know whether any rewards system has the ability to support frequent or rapid change, consider the following:

  • Model the best way forward. Can you easily understand the impact of different scenarios? For example, if you are asked to contemplate staffing reductions or early retirement plans, or to ramp up hiring for a recovery, or to change targets or payout curves, you’ll need to model the effects of staffing changes.
  • See the effect of org changes. If there are major organizational changes in play, how easy is it for you to model options for the org structure and run compensation models to see the cost impacts? These models should be able to handle multiple or matrixed hierarchies and the complex roll-ups that reflect real life.
  • Implement temporary pay changes. Your response may require you to implement a freeze on wage increases or temporary pay rate changes. How quickly can you adjust?
  • Defer payments. If necessary, can you easily manage deferred payment of earned variable compensation?
  • Support short-term workforce changes. Your strategy may call for you to implement temporary rewards plans to support working remotely, or perhaps you will need to consider special pay or PTO requirements based on union contracts or work councils, or to implement pay protection for your sales force so they are there for you when the crisis ends.
  • Shift behaviors with comp plan changes. When forecasts change, you may need to be able to re-tool bonus plans, for example, to shift focus to servicing and retention of existing customers or to focus on margin targets or cost control, rather than net new revenue.
  • Localize pay models globally. Because regions may be affected differently by the change, you need the ability to model and implement distinct plans and processes in diverse regions.

It is for these and other reasons that it pays to have an automated rewards platform. The benefits are compelling in normal times, to help your business perform and remain competitive, but in disruptive times, they are essential.

Download our free eGuide, Agile HR: How to Adapt Strategy, Motivate Performance, and Optimize Comp Spend through Periods of Change, to assess your level of preparedness and see how a centralized total compensation management system can help your business adapt to change.

Download the Agile HR eGuide

Blog feed


Employee Retention Strategies: How to Successfully Retain Talent

Honoring the Companies Most Admired for HR

DEI and Pay Equity: A Strategic Guide from Goal Setting to Execution

Goal Management: Strategies for Success

Maximizing Effectiveness with Pay for Performance