EMPLOYER TAX BRIEF
Communicate carefully about compensation during the pandemic
The COVID-19 pandemic and resulting economic fallout have spurred layoffs and furloughs for many employers. As the months pass, organizations that have retained employees face another dilemma: How should we handle compensation changes?
Pay raises have been out of the question for some organizations. In fact, more than 25% of employers surveyed in June by global advisory firm Willis Towers Watson reported reducing salaries rather than increasing them. However you handle compensation this year, it’s critical to communicate clearly and carefully with employees.
Hold honest discussions
Even in the best of times, communication about raises can be tricky. Most employers keep individual compensation information confidential, of course. Yet it helps to provide some context about the calculations and economic circumstances that determine raises so employees feel confident that changes to their compensation (or delays in those changes) are in line with the market and will eventually reflect their contributions.
In some cases, you might be able to offset pay cuts or the lack of a raise by offering a nominal one-time bonus or nonfinancial perk, such as additional time off or more flexible working hours.
Revisit your raise schedule
Now may also be a prudent time to revisit the “raise schedule” your organization uses to time compensation changes. Although many organizations issue raises following annual reviews, other schedules can make sense.
Another layer of complexity
Adjusting employees’ compensation levels has always been a challenging and delicate matter. This year’s crisis has added another layer of complexity to the task. Consult an employment attorney to identify sensible communication approaches that limit your legal exposure. And please contact us for additional guidance on analyzing your payroll and developing policies regarding pay raises or cuts.