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COVID-19 (coronavirus) impact on hourly workers

Companies consider how to care for hourly workers

Compensation Strategy & Design|Talent
COVID 19 Coronavirus

By Josephine Gartrell and Megan Boyce | March 20, 2020

COVID-19 is wreaking havoc across industries, and companies must act quickly to address how to compensate their hourly workers.

As part of a series of pulse surveys related to COVID-19 (coronavirus), we are seeing a shift in attitudes toward the potential impact on business.

A third survey (our latest) conducted on March 16 focused on hourly workers and found a majority (59%) of respondents expect a moderate to significant negative impact on their businesses. In contrast, our first survey, beginning February 19, found that benefits managers’ initial expectations on the economic impact were muted with 15% of firms expecting COVID-19 to have a moderate or significant negative impact over the next six months. The second survey, beginning on February 24, found that compensation managers put that number at 34%. While this may reflect differences in the responsibilities and perspectives of the respondents, it is also aligned with the growing concern reflected in the market reaction, governmental restrictions, and personal burdens during this unprecedented period and with new information coming to bear as events have evolved.

Hourly workers face uncertainty

Due to COVID-19, a seemingly endless list of companies across industries faces voluntary or mandatory closings, including retailers, restaurants and bars, manufacturing plants, distribution centers, universities, gyms, and fine arts and sporting venues. Consequently, employers across North America and worldwide are making real-time decisions about how to compensate and otherwise care for their hourly employees who face uncertainty regarding their futures.

To enhance our clients’ understanding of what stopgaps companies across industries are implementing to address issues particular to hourly workers, we conducted a pulse survey of over 800 clients representing 8.4 million employees globally and 4.3 million in North America.

We also produced industry-specific analysis of the data for eight industries, including energy and utilities, financial services, general services, healthcare, IT and telecom, manufacturing, public sector and education, and wholesale and retail.

Survey participants by industry. 10% energy and utilities, 14% financial services, 7% general services, 16% healthcare, 7% IT and telecom, 31% manufacturing, 4% public sector and education, and 11% wholesale and retail
Figure 1. Survey participants by industry

Most companies anticipate a negative impact

More than half of respondents expect a moderate to large negative impact on business over the next six months with one-third expecting negative impact over the next 12 months. Specifically, 59% of participants expect a moderate to large negative impact on their businesses compared to 36% anticipating a negative impact over the next 12 months and 10% having the same expectation over the next 24 months.

Notably, however, a significant percentage of companies across industries responded that they are “not sure” about the impact of COVID-19 (ranging overall from 28% for the six-month timeframe to 47% over the 12-month timeframe and 63% over a 24-month period). This reflects the significant current level of uncertainty and the fluidity of the situation. Additionally, companies’ outlook over the next six months varied with energy and utilities, wholesale and retail, and general services contemplating the largest negative impact.

Most sick workers to remain on payroll

Companies clearly want to ensure that sick workers do not come to work for fear of losing hourly pay. Not surprisingly, 72% of participants stated that they would pay their hourly workers who test positive for COVID-19 with only 9% stating they would not. The remaining 19% were unsure of their policy as of the date of the survey.

Responses varied by industry — energy and utilities (84%), financial services (82%), and public sector and education (81%) were most heavily weighted toward paying employees for missed work with general services (61%), healthcare (65%), and wholesale and retail (65%) comprising industries with a significantly lower number of positive answers in this regard.

Survey results for specific questions about pay for hourly workers impacted by COVID-19
Figure 2. Survey responses

The next two most common circumstances for which the majority of participants will pay hourly workers for missed work include work missed because of mandated work location closure (54%), or if an employee voluntarily stays home due to cold or flu symptoms (51%). Responses for both of these categories also varied depending on industry with energy and utilities, financial services, and public sector and education having the greatest number of positive responses.

Participants showed the greatest variation in responses across industries on whether to pay hourly employees if their work location experiences a mandatory closure (ranging from 16% in financial services companies to 42% in healthcare organizations; the average being 33% of participants).

Results were split almost equally among participants’ treatment of pay to employees who had to miss work for lack of childcare with 36% indicating they would pay the employee for missed work; 30% indicating they would not; and 34% not yet sure. Similar to the aforementioned circumstances, responses were split by industry; again, with energy and utilities (49%), financial services (63%), and public sector and education (61%) indicating the greatest willingness to pay for missed work for this reason.

Less than a third of participants (28%) indicated they would pay an employee for missing work due to their discomfort in attending because he or she falls within a certain age bracket identified as having an elevated risk.

Number of missed workdays covered and amount of pay

According to the survey, most companies that will continue to pay hourly employees plan to do so for 10 to 15 days with the typical organization doing so for 14 days

About 90% of respondents who were going to pay employees under a given circumstance indicated they would pay at 100% of current base Responses by companies in manufacturing indicated the least likelihood of paying time off at 100% of the base rate.

Pay for employees who are involuntarily required to stay home

39% of respondents will pay 100% of pay without drawing from PTO for workers required to stay home
Figure 3. Company response to employees in mandatory quarantine

Many employees are required to work from home as workplace closings occur due to company policy or governmental mandates. However, not all jobs can be done from home; e.g., a healthcare worker, store manager, server, personal trainer, dog groomer, etc. In addition, some jobs could be done from home, but the employee may not have the space or necessary infrastructure to work from home; e.g., tutor, administrative assistant, paralegal, etc. With the virus spreading so rapidly and the government’s role in prevention, companies commonly find they have some employees in a mandatory self-quarantine.

About 40% of survey respondents plan to cover 100% of pay for these employees without drawing from paid time off (PTO). Less frequently, companies are requiring PTO to be used regardless of the circumstance. A small number of companies are starting to cover pay at less than 100% without drawing from PTO.

Pay adjustments for employees remaining at work

Whether it be through using PTO, taking sick days, or being in a forced quarantine, many employees are not coming into work out of mandate or fear of contracting/spreading coronavirus. But what about employees that are still coming to work while their coworkers are out due to quarantine or self-exclusion? Most survey respondents indicated their organizations do not adjust pay for these employees. Of the 25% of companies that do adjust pay for these employees, some strategies being implemented are a premium on hourly pay, cash and non-cash recognition, a bonus and additional PTO allocation.

75% of respondents expect no change to pay for workers remaining at work
Figure 4. Pay adjustments for employees remaining present at work

As coronavirus spreads and going into work becomes more hazardous, companies will face growing pressure to provide supplemental or premium pay to crucial personnel. Therefore, it comes as no surprise that the healthcare industry acts as an outlier while other industries are relatively consistent with the above adjustment practice. Only 57% of healthcare industry respondents report making no change to account for employees coming into work; thus leaving 43% taking some action to compensate for the risk their employees inherently take in coming to work to care for COVID-19 patients. Hourly pay premiums are the most common practice among these healthcare respondents at 13%. The healthcare example suggests that as the situation evolves organizations may revisit this topic.

Industry spotlight: Retail

With decreased foot traffic and store closures as worry about coronavirus continues to grow, retail companies are being forced to think about how to compensate employees. Retail companies often have sales associates and other employees that have a significant portion of their income based on incentive pay. If stores are closed and there is no way for employees to earn this variable pay, retail companies are faced with the hard decision of whether to account for this lost income. The challenge of this decision is further fueled by the lack of insight as to how long this crisis will last. 

Forty percent of retail respondents indicate no intention to change incentive pay policies at this time, while their most prevalent action (42%) is waiting a period of time before implementing any new policies. This approach will give retailers time to better understand the evolving situation before making decisions that will impact a sizable amount of their workforce.

Incentive pay isn’t the only aspect of compensation at risk for retail employees. Some retail industry workers (e.g., wait staff) rely on tips as a significant portion of their income. These employees often have lower wage rates to account for their anticipated tips. Therefore, this loss could have a large negative impact on this group. Despite this potential hardship, only 32% of respondents are waiting a period of time before implementing any new policies, while 68% of respondents do not plan on changing policies.

Rapid changes require continuous study of practices

Due to the rapid nature of business changes due to COVID-19, we expect many companies will continue to reevaluate policies on an ongoing basis. We plan to continue to survey companies and monitor the emergence of any compensation trends as the situation progresses.

Authors

Director, Executive Compensation

Analyst, Executive Compensation

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