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Impact of COVID-19 on Compensation

Knowledge Center / Blog

Impact of COVID-19 on Compensation

By The Employer Group - Sep 01, 2020

As organizations review the effects of COVID on their operations, many are looking to cut costs due to revenue loss.

In a recent poll of more than 2,200 HR professionals, the Society for Human Resource Management (SHRM) discovered that 40% of employers have decreased pay rates or were considering this measure. Reasons given for the pay changes include keeping the operation running and keeping staff employed and allowing access to their benefits. Some, however, are finding that raising wages or offering “hazard” pay may have a more positive impact on their business.

It’s important to be cautious if you’re considering pay cuts. Here are a few tips to consider:

Top leaders and employers should consider cutting their own pay to improve morale. When employers lead by example, a shared sense of sacrifice becomes evident. Employees will know that you truly care about them and you’re willing to adapt during these difficult times.

Be fair and consistent. Employees doing similar work should receive similar pay cuts.

Be aware that a pay cut may create a loss of exempt status. Employees must be paid at least $684 a week ($35,568 annualized), to be considered exempt from overtime.

Keep employees informed and be transparent. Be honest with your employees regarding business financials and the company’s strategy for recovery. Employers are not expected to know all of the answers and it’s okay to let employees know that you’re unaware of what the future will look like. Listen to your employees and be open to whatever ideas they may have to help maintain financial stability.

Restore original pay when sustainable. If cutting pay is a temporary measure, make sure your employees are aware that you have plans to restore their original pay as soon as possible. Provide updates frequently and avoid overpromising.

Our Human Resource professionals at The Employer Group can help you weigh your options when it comes to adjusting pay amid the current economic turmoil. Please reach out to our experts at if you’re looking for professional compensation expertise.

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