When businesses face a crisis, it leads toward nonstandard procedures and major economic challenges, several organizations go through their compensation plans which means of reducing costs. This situation could arise in several types of economic recession, anything that upsets business steadiness and influences the bottom line. For instance, a global pandemic COVID-19. Depending on different states’ situation, many companies were enforced to shut down for months. Whereas, other companies operated at reduced capacity or faced other great troubles. In such circumstances, many companies had to make hard decisions for their companies to persist. Unluckily, millions of workers were laid off.
If your business is facing economic hurdles, here are some easy collective, and alternative ideas to retain employees while sinking expenses and justifying the pain felt by your team. One thing should be noted that these tactics could be temporary or permanent in the period, depending on the circumstances.
1. Hiring restrictions
This means that the hiring of new employees stops for a period of time. Hiring restrictions are frequently among the top strategies considered by companies because it diminishes the impact on the current workforce.
2. Pay restrictions
Pay restrictions are when merit-based pay increases stop and raise are no longer given. They can be restarted at any point in the future when company management feels relaxed giving raises. From the employee viewpoint, pay restrictions or pay freezes are generally desirable to drops in regular wages or disruptions to payroll.
3. Removal of perks/benefits
Workplace perks are the “additions” that make any company exceptional and enhance it’s employees’ experience. Sometimes these benefits come with costs for employers, such as: Ordering in lunch for staffs, paying their membership dues for industry associations or even to the neighbouring gym, offering financial awards or gifts. Unluckily, in times of economic catastrophe, such kind of additions are insignificant and must be dropped.
4. Modification of annual incentives
Businesses have the option to hold bonuses that employees gain over quarterly, semiannual or annual basis – for meeting predetermined performance criteria. Companies could also consider merely reducing the percentage of their base salaries that employees are entitled to earn. It is good to make alterations to annual incentives before payout for the annual incentive would be due.
5. Pay drops
This is the worst-case scenario when regular pays are reduced without moving work schedules. Workers are drawing a lower paycheck for doing the same work and spending the same amount of time on the job. Logically, it’s a disliked and painful decision for management and employees alike.
Furloughs are basically quite different than layoffs. A layoff is permanent, whereas, a furlough means that you aim to retain your employees and bring them back to work within one year. Their service is still alive. They are just not coming in to work or being paid in the period of crises. It’s like their job is on pause. The decision as to which employees should be furloughed is usually depended on business need.
Besides, these simple tricks management have some moral and ethical responsibility as well, particularly when it’s about alterations in their pay. Because compensation not only affects employees but it also influences their families and can drive sore adjustments in lifestyle and other tough decisions. It can put people in tough financial positions that can have very long-lasting effects. That’s why it’s better to convey unwelcome news in person, if possible.
Senior management may want to consider being present. These are the people to whom employees look at as their guideposts, especially in times of ambiguity. Therefore, active management can be essential in providing a sense of safety and stability.
Submitted by Aliza Sohail, Date 01 January 2021.