Businesses have been forced to continually adapt throughout the Covid-19 pandemic. With supply chains disrupted, in-person meetings restricted and revenues contracted, companies still have to pay their employees. And these exceptional circumstances have led to a variety of different work and pay outcomes — some positive, some less so.
A recent report by the International Labor Organization (ILO) shows downward pressure on wages in two-thirds of the countries for which data was available. The report also shows that wages for women and low-paid workers have been disproportionately affected by the pandemic.
Meanwhile, a global World Bank survey found that companies’ sales dropped 27% on average from October 2020 to January 2021 compared to pre-pandemic levels, having already fallen by 45% from April to September 2020. This is a huge financial and human challenge. Some organizations have had to make employees redundant, furlough workers or reconsider their pay strategies, such as salary reductions based on where employees live.
The ADP Research Institute’s People at Work 2021 report reveals about 28% of employees took on additional tasks or changed roles at work because of Covid-19. Generation Z workers were the most agile; more than 36% have changed roles or taken on additional ones. About 68% of these employees received financial rewards in form of pay raises and bonuses for the additional responsibility, though concerning gender disparities have emerged. The research shows about 20% of all workers were not compensated for their additional efforts.
Increased work hasn’t guaranteed more pay
“The Great Resignation”
Companies also face another ongoing challenge: employees have been leaving jobs in large numbers. Almost 4 million Americans quit their jobs in April 2021, the highest level ever recorded by the U.S. Bureau of Labor Statistics. The ADP Research Institute found that over 46% of employees globally had made a change to their job, had considered it or were actively trying to. In addition, 15% of working parents said that they or someone in their household stopped working voluntarily; that figure rises to 26% for those with children under the age of 1.
Anthony Klotz, an associate professor of management at Texas A&M University, says many workers are considering changing jobs as restrictions ease and companies call employees back to the office.
He says that although there’s a pent-up “resignation demand” from 2020, many are leaving simply because they are burnt out. This is also a consequence of employees taking on additional duties or new roles but not being compensated accordingly. The ADP Research Institute found that fears of job insecurity have compelled 76% of global respondents to do more work such as taking on extra tasks or working longer hours. This trend is likely to lead to even greater competition for talent.
Despite these stress factors for current workers, there’s a booming job market; a report from the U.S. Labor Department showed that there were 9.8 million job openings in July, with 943,000 added that month. However, only 8.7 million unemployed people were seeking jobs, meaning there are more jobs available than people to do them.
In Germany, the ifo Institute’s employment barometer shows that the appetite for hiring has rebounded past pre-2019 levels. In the U.K., however, the combined impact of the pandemic, Brexit, labor shortages and low unemployment is making hiring difficult in many sectors.
Revisiting pay post-pandemic
Amid these fluctuations in the job market, ILO Director-General Guy Ryder says the post-pandemic world needs better and more balanced pay policies. Wages will almost certainly come under pressure in the months and years ahead. “Particular attention must be given to the pay of women, people on low wages and young people, as they have been hardest hit by the socio-economic effects of the pandemic,” he says.
A recent survey by Willis Towers Watson showed that U.S. employers across the board are overwhelmingly planning to raise pay in 2022, with only 3% of companies not planning increases. Catharine Hartmann, North America Rewards practice leader at Willis Towers Watson, says that though employers need to continue to manage their fixed costs effectively as they rebound from the pandemic, they also need to boost compensation with signing, referral and retention bonuses, skill premiums and mid-year adjustments or pay raises.
The pandemic has raised questions about the minimum wage because low-wage workers were so disproportionately affected by the pandemic. Encouragingly, steps are being taken to raise pay levels in many parts of the world. Some U.S. companies are beginning to raise starting pay for hourly workers to $15 per hour or more, though the federal minimum wage remains $7.25. Germany is increasing its minimum wage from €9.35 ($11.07) to €10.45 by mid-2022. Poland also plans to increase its national minimum wage in January 2022 from the current rate of 18.30 zloty ($4.81) per hour to 19.60.
A number of countries this year have already instituted increases of 15% or more for their statutory minimum wages. Mexico raised its minimum wage from 123.22 pesos ($6.18) to 141.70 per day; Latvia from €430 ($510) to €500 per month; and Turkey from 2,324 lira ($280) to 2,826 per month.
As countries vaccinate their populations and parts of the world are beginning to open up again, the sectors most affected by pandemic lockdowns — hotels, restaurants, bars, travel and sports industries — have copious job openings. Hartmann says attracting and retaining talent remains a major challenge for employers, and the current environment makes these challenges even more difficult.
Companies are starting to come out of crisis management and have the chance to reset work and rewards.
Catharine Hartman, Willis Towers Watson
“Companies are starting to come out of crisis management and have the chance to reset work and rewards. Beyond competitive salaries, companies need to focus their spending on a diverse set of health, wealth and career programs to drive employee engagement,” Hartmann says. “The key is to balance short-term cost management with the need to build resilience so they can rebound when they need to.”
Read next
Sign up to keep up to date with ReThink Quarterly.