COVID 19: Managing Compensation Realities

The coronavirus pandemic has had a huge impact on businesses nationwide. Newport’s Compensation Consulting team has been monitoring the impact on compensation programs and has developed some innovative strategies to enable companies to move forward and operate in the “new normal.”

Now that some restrictions have been lifted, we have a sense of which industries have “slowed” almost to a halt, as well as those that “flowed,” or prospered during this time. For instance, we know the BEACH sector (booking, entertainment, airlines, cruises and casinos, hotels and resorts) is expecting revenues to decline by more than 50%.¹ On the other hand, a number of industries are experiencing higher demand; these industries have adapted to the current environment by changing the way they reach customers (restaurants pivoting to food delivery, fitness & wellness classes offered online, telehealth services, etc.).¹ However, with close to one- third of organizations expecting significant declines in revenues, there will almost certainly be impacts to employee compensation, retirement & benefits spend.

As we have a clearer picture of how industries have been impacted, let’s review some compensation strategies organizations have been using to reward essential front-line employees. We’ve all heard about hero pay and hazard pay making headlines, especially in the retail, grocery and healthcare industries. These reactive pay strategies were enacted quickly in response to the pandemic. However, retail companies are quietly discontinuing these programs. It’s very difficult to take any kind of pay away, even if it was made clear that the additional pay was temporary. Many organizations are considering raising the minimum pay at their organizations to “make up” for taking away hazard pay premiums. For instance, Target paid $2 an hour more during the months of March and April. They also provided bonuses. Now, Target is considering adjusting starting salaries to $15 an hour by the end of 2020, which coincides with the sunset of the $2 an hour hazard pay premium.² The company will also provide a $200 bonus to all employees as a gesture of thanks.

Many workforce cost control strategies have emerged including furloughs and layoffs, reduced work hours, hiring freezes, pay freezes and pay cuts. According to, two-thirds of employers took some action in March and April that negatively impacted employee pay, such as layoffs and furloughs. The good news, however, is that only 10% of employers expect
COVID-19 layoffs to be permanent.

Now that we are mid-year, many organizations typically begin salary budget planning for the year ahead, which demonstrates pro-active and strategic thinking. According to the consulting firm, Korn Ferry, a good 40% of organizations are planning to institute salary freezes and more than one- third are grappling with how and when to re-institute all of the pay cuts they implemented (especially in the executive ranks). The average salary cuts for executives was reported to be about 21%, while other ranks within the organization endured 15% pay cuts.

As we look to recovery and move onward, we need to adapt and think about how we might need to change our compensation programs going forward.

One big question on everyone’s minds is what to budget for salary increases and whether or not to adjust salary ranges this year. Feel free to call your Newport representative and get in touch with us for the latest data and projections. It is a rapidly evolving situation as the markets divide and the data will need a lot of interpretation for your specific industry and location.

Another open question is how to distribute relatively small salary increase budgets. We believe now is a perfect time to look inward and fix any pay inequities or compression issues that existed before the pandemic. We are helping clients conduct Range Placement Analyses to help determine where employees should be within the ranges versus where they actually are. By understanding the magnitude of that budget, you can chart out a course for the next couple of years.

Also top of mind is how to handle incentive payouts. Many talent retention strategies rely on short- and long-term incentive programs to keep executives in their seats. The pandemic and impending recession will do its best to dismantle these programs but you must have an alternative game plan! Our compensation consulting team has been working with clients to design and implement “Executive Retrospective Bonus Programs.” Such programs enable organizations to consider their past performance trajectory from prior years and then determine what 2020 performance might have been had the pandemic not occurred. The Board is then asked to authorize a discretionary “incentive award pool,” from which each executive is rewarded on a proportional basis using prior year cash compensation levels as the baseline for award determination.

In summary, these last several months have changed the world we live in and good compensation programs can position your organization for success in the future. We must take the lessons learned through the pandemic and evolve.

Newport’s Compensation Consulting team is ready to help you get the best return on investment from your human capital. Contact your Newport representative for more information.

¹ Korn Ferry Digital, Impact of Covid-19 on Rewards & Benefits Pulse Survey #3, May 2020
² Kelly Tyko, USA Today Published 8:59 am ET June 17, 2020. Article Title: Target raising its minimum wage to $15 an hour, giving frontline workers $200 coronavirus bonus

Newport Group, Inc. and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance and brokerage services.


Copyright © 2015-2021 Newport Group, Inc.  All rights reserved.
Unauthorized access is prohibited. This site is designed for U.S. residents only.

Newport Group, Inc. and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance and brokerage services.
Investment Advisory and fiduciary consulting services are offered through Newport Group Consulting, LLC, a registered investment adviser and wholly owned subsidiary of Newport Group, Inc.
Securities are offered through Newport Group Securities, Inc., a dually registered investment advisor and broker dealer, member FINRA and affiliate of Newport Group, Inc. Securities in California are offered under the Newport Securities Insurance Services. See BrokerCheck for more information. Other insurance products may be offered by Newport Group, Inc.
For more information about Newport Group Consulting and its services, please refer to our Form ADV Part 2A.
Newport Trust Company, is a New Hampshire state chartered trust company and wholly owned subsidiary of Newport Group, Inc. Newport Trust Company provides independent fiduciary and trustee services for employee benefit plans.