Managing pay structures in a post-COVID-19 world
Building a resilient workforce, People & Organisations
Businesses are looking to manage a new world of work in a post-COVID-19 economy. From the human cloud and digital nomads, to global workers and asset-light businesses, innovative workforce models are being debated and steadily adopted.
Technological advances have resulted in a shrinking world, where global workers work across cultures, nations, and languages. Online marketplaces now allow talent to be hired by businesses for specific jobs, without limiting neither talent nor hirer to any location – giving rise to the human cloud. Digital nomads earn their living via these digital means, working from coffeeshops to co-working spaces anywhere in the world.
“As the way work is done is changing, there is also a steady transformation in the way the workforce is compensated,” says Lee Voon Keong, associate partner, Human Capital Solutions, Aon, Southeast Asia.
Some organisations pay “crowd workers” by on-demand tasks via sites such as Amazon Mechanical Turk, while others regularly pay a global workforce that is location-agnostic. Yet others such as Uber and Airbnb pay a workforce that is self-employed but delivers their company’s experience.
Traditionally, pay has been driven by three key factors: role, location, and worker type. It is defined by the role of the talent, and the type of work, job level and skills that he/she has. Location of the role also determines cost of living and ultimately, cost of talent. Different worker types such as full-time, part-time, contingent or gig further impact pay.
“Amidst the adoption of diverse pay frameworks for different working models, the recent COVID-19 crisis has not only accelerated the transformation of pay, but also morphed the lens through which businesses look at pay,” says Ishita Goel, consultant, Human Capital Solutions, Aon, Southeast Asia.
Revisiting the role factor
To cope with the pandemic, organisations worldwide have taken a variety of actions to ensure continuity of business, including instituting pay cuts, unpaid leave, furloughs, and redeployment of employees with no change in pay. Some have provided frontline employees with hardship allowances or minimum wage increases.
“There is a common thread across these actions,” Goel explains. “The priority has been to keep the workforce employed through these uncertain times, despite the need for temporary or permanent cost-cutting measures.”
Aon’s COVID-19 Pulse Survey found that 56 percent of organisations in Asia expect an accelerated focus on workforce agility and internal mobility as a result of COVID-19. Several key considerations emerge:
- Should businesses pay for a role rather than pay for skills?
- Should less traditional and more networked organisations have flatter or tiered pay structures?
- Is it time to rethink the underlying principles for incentive plans?
- How can businesses decide performance bonuses when employees are encouraged to innovate?
Managing location-agnostic talent
Pre-COVID-19 estimates indicated that there would be a billion remote workers by 2035
. “This will only get compounded now, as every organisation revisits the relevance of physical offices, places heightened focus on digital transformation and increases use of virtual processes across functions,” says Goel.
Aon’s COVID-19 Pulse Survey found that 83 percent of organisations are considering permanently changing their working models across Asia. This means that crucial considerations are being made when it comes to pay:
- Pay structure for employees in different working models (office vs remote)
- Change in pay due to change in location to a remote/virtual work environment
- Impact on pay benchmarks due to location
- Legal and taxation implications for organisations managing a location-agnostic talent pool
Emergence of a different workforce
With more than a third of organisations realising they need to adapt their workforce planning models, according to Aon’s COVID-19 survey, many are looking to optimise their budgets by implementing different workforce structures. For instance, flexible workers (such as part-time workers) are augmenting the workforce with skills and delivering higher productivity. As a result, the differential in pay and benefits for different worker types has become more pronounced than ever.
- Adopting a different or common pay philosophy and structure for different worker types
- Enhancing personalisation of pay to worker types and models
- Determining pay benchmarks for different worker types
- Taking a more holistic view of pay – from employee pay and benefits to cost to company
Accelerating the future of pay
COVID-19 has forced organisations to think about how they can become increasingly agile. This has meant taking a hard look at the future of work and pay. “It will bode well for forward-thinking organisations to strategise towards long-term drivers of pay and performance and make changes in a phased manner to optimise pay effectiveness,” says Lee. “This will help them to address their priorities and align to the outlook of their respective industries.”
Pay will be one of the key factors providing competitive differentiation in the new normal. It will be critical for businesses to define and adapt pay for different worker types and nature of work for the long-term. They need to be flexible, fair and transparent in compensating talent and optimising people spend at an organisation level while creating equity across pay models, says Lee.
A personalised, flexible, yet holistic pay system with a design and delivery that is enabled through technology is the key to keep employees engaged and ensure business productivity in a post-COVID world of work.