Actions reflect need to manage costs and support employees
Aon’s new pulse survey shows that while organisations across the UK and mainland Europe are remaining heavily focused on business continuity and crisis management, they are now shifting gears toward adjusting employee reward programmes and workforce levels to reduce costs, support employees and to align human capital programmes to the current situation.
The survey, ‘Adjusting Total Rewards Programmes and Workforce Strategies in Response to COVID-19’, was conducted between 7th - 10th April and gained responses from 1,889 organisations around the world, including more than 800 responses from the UK and mainland Europe. It followed an initial study conducted between 17th - 20th March.
Sean Carney, partner and head of Aon’s Rewards Solutions practice in Europe, said: “Between our first and second pulse surveys, a span of three weeks, the number of companies postponing and/or cancelling salary increases doubled to about 40% of the organisations in Europe. In the UK market, 25% of companies surveyed have already frozen or cancelled salary increases for 2020 for selected roles or for all employees, while 18% have postponed them until further notice. Among UK companies surveyed, 57% have not made changes to their compensation programmes at this time.
“So far, we have seen changes focused on fixed pay either through cancelling or delaying increases or via direct salary reductions. In contrast, we observe more of a wait-and-see approach adopted by companies regarding wider considerations for cost reduction. These could emerge through adjustments to variable pay - including bonus payments - as well as in other areas, notably retirement benefits. It will be interesting to see how this situation develops over the next few weeks.”
Sean Carney continued:
“For the UK, about a third of organisations have so far focused on non-financial aspects and encouraged employees to take previously accrued paid time off or unpaid leave. Still 66% have yet to make changes to health and benefits plans and 84% of the organisations have yet to make changes to retirement plans. “On the other hand, about a quarter of organisations have already been encouraging employees to take previously accrued holiday – however limited the possibilities may currently be.”
Across Europe, about 40% of the organisations surveyed are either currently downsizing or considering downsizing their workforce via layoffs or furlough arrangements, compared to 20% foreseeing potential downsizing in the previous study, just three weeks earlier.
The most impacted sectors were energy, retail and manufacturing, where the highest levels of downsizing via furlough and/or layoff arrangements were reported in the survey. Among these sectors in Europe, 60% to 70% of the organisations have already downsized or are considering downsizing via layoffs or furlough arrangements. Among the energy sector, 44%, and of the retail and manufacturing industry about 30%, expected downsizing in Europe just three weeks ago.
Layoffs remain restricted to 6% of the organisations in Europe and 8% in the UK. However, 11% in Europe and 13% in the UK have already furloughed employees to mitigate short-term impact (note that some companies reduce workforce via both layoff and furlough arrangements). In both Europe and the UK market, more than 20% of the organisations are actively considering downsizing with layoff or furlough (or both).
Essential vs. non-essential firms
Among companies in Europe offering special pay arrangements to employees in high-risk roles, more than 90% identified themselves as essential companies in the context of stay-at-home and lockdown regulations.
For the UK market, 21% have already implemented or are considering implementing special pay programmes, such as hazard pay or increased pay to reflect both increased demand and potential danger in a role.
Figures are similar in mainland Europe, where about a quarter of responding organisations have adopted these special pay programmes and are most commonly used for their front-line staff across manufacturing (52%), logistics (36%) and operations (35%) teams. For groups that work on-site, companies are also taking extra precautions such as deep cleaning, temperature checks, increased distance between work stations and COVID-19 testing for essential employees.
For broader employee groups who are more likely to work from home, an increasing number of companies (more than 60% in Europe) are extending stipends or one-off payments for equipment purchases to support remote working. Similar benefits are being extended to support childcare.
In terms of hiring, only about 13% of the UK market has not been impacted by the COVID-19 pandemic and continues to hire new personnel as normal. Among the rest of the firms, 35% have already halted or delayed hiring and half of the organisations remain cautious and focused purely on selective roles or replacing key positions. Only the remaining 2%, mostly essential businesses, has accelerated hiring to meet surging demand for essential products. Companies have quickly adopted virtual processes and in the UK 76% have already implemented virtual interview and recruitment processes. In most cases, these systems were already adopted prior to the COVID-19 outbreak but have now been expanded more widely.
Results from the ‘Adjusting Total Rewards Programmes and Workforce Strategies in Response to COVID-19’ survey can be accessed at: https://rewards.aon.com/en-us/sites/reports/covid-19-pulse-survey-2
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