What Now?

A Guide to Making Bold Compensation Decisions in the Face of COVID -19

In the blink of an eye, our business and personal lives have shifted.  As leaders responsible for managing through an economic downturn while preserving the ability to bounce back rapidly, our people priorities have changed dramatically.  These uncertain times call for bold (and early!) decisions about staffing and related compensation issues. Taking decisive and appropriate action in the face of widespread fear and anxiety is not easy, but critical. History shows that many leaders under-react, while others make quick, hip-shot choices that fail to achieve the organization’s short and long-term goals.  This guide is intended to help you avoid these costly mistakes.

At first glance, it may seem that our choices are limited.  Fortunately, though, there are a number of compensation management alternatives to consider before making a final decision.  Having these alternatives at your fingertips will make your job easier during this challenging time.  But first, a few words of warning:

  • There is no single, one-size-fits-all solution, and your decision needs to factor in your unique culture, situation, and timing.
  • Some of the best solutions may entail creatively combining various alternatives to best fit with your team and your goals.
  • Consider involving a small circle of trusted advisors (internal and/or external) to test alternatives prior to finalizing your decision.
  • Remember that how you communicate your decision is key. Experts always suggest communicating a change honestly, and if possible, planning for a single roll-out of messaging- not a drip, drip, drip of bad news as a crisis unfolds.  (Rip the band aid off.)

With these thoughts in mind, below is a list of possible alternatives for managing costs, while retaining your most valuable employees:

CATEGORYMETHODCONSIDERATIONS
1. Staffing Alignment

  • Eliminate temp usage

  • Implement hiring freeze for non-essential workers

  • Eliminate non-essential overtime or add overtime and reduce staff

  • Reduce workweek

  • Implement “surgical” staff reductions

  • Implement incentives to leave (early retirement, voluntary lay-offs, buy-outs)

  • Furlough employees

  • Lay off employees


  • Many of these approaches will be accepted if implemented effectively

  • Surgical reductions allow companies to let go of less productive/ essential employees but require care

  • Incentives to leave can be costly and result in the exiting of more critical staff

  • Any furloughs or layoffs should be done very carefully
2. Compensation Adjustments

  • Delay compensation increases

  • Defer portion of pay, temporarily; reinstate full pay & pay back deferral at later date

  • Reduce pay on a tiered schedule, with largest reductions to most highly compensated individuals

  • Reduce pay uniformly


  • Delays may be accepted by most

  • Employees don’t lose income in the long run

  • Tiered pay reductions (such as Tesla’s approach) are generally well accepted

  • Uniform reductions in pay may ultimately cause your BEST employees to leave
3. Modifications to Benefits/Perks

  • Eliminate dues & subscriptions

  • Adjust wellness plans

  • Reduce/ modify parking benefits

  • Modify tuition reimbursement

  • Modify auto benefits

  • Modify or eliminate tuition reimbursement

  • Freeze or defer 401(k) matches


  • These are fairly easy for impacted employees to understand

  • These may also be restored at a later date
4. Employee Retention/ Organizational Development

  • “Stay” Bonuses

  • Phantom Equity

  • Long-Term Cash Plans

  • Executive Deferral programs

  • Gainsharing Plans


  • The first four approaches typically defer payouts, while sending a strong/ positive message to those who are most critical to the organization’s success

  • Gainsharing is an effective engagement tool. Successful implementations typically yield strong short & long-term savings

As it turns out, there are many approaches to managing your most important investment during this critical time.  The trick is to select the right one or ones that enable you to:

  • Achieve the savings you need in the short term
  • Act in alignment with your culture and values
  • Demonstrate your understanding and care for those impacted by the changes
  • Retain your best employees- the very people who will help you to turn the corner and achieve your longer- term goals

Making the right decisions in a timely manner is challenging.  History reveals many otherwise effective leaders who failed to do just that during times of crisis.  With careful and prompt planning and thoughtful, honest communication, this moment can be a positive and pivotal one for your team.

 Admittedly, it’s a tall order.  But a bold and timely decision will ensure that you are poised for the future, and ready to put a global pandemic in the rearview window.

To discuss your specific challenges with one of our advisors, we are offering a 30 minute no- cost consultation through
May 31, 2020.

Click here to schedule a call.

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