A Deeper Dive into Work and Rewards Implications of COVID-19 · Social considerations Competitive...

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A Deeper Dive into Work and Rewards Implications of COVID-19

April 14, 2020

Willis Towers Watson Webcast

© 2020 Willis Towers Watson. All rights reserved.


Today’s presenters

© 2020 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only. 1

Ravin Jesuthasan

Work & Rewards

Alex Weisgerber

Rewards

Josephine Gartrell

Executive Compensation

Tracey Malcolm

Talent


Today’s discussion


Principles Rewards Priorities Managing Work Questions and Answers


Leaders are grappling with the following challenges


Containing costs

Responding with agility to massive changes in demand

Reducing risk and ensuring business continuity

Virtualizing work

Ensuring humane, fair, and compassionate approaches to managing the workforce


We believe there are five key principles for shaping an effective course of action


Understand this as a

defining leadership

moment

1

Adopt an agile and

continuous learning

mindset

2

Understand the

perspectives of and

engage all

stakeholders

3

Promote employee

and company

wellbeing

4

Balance medium-term

needs and longer-

term business

objectives

5


We suggest the following objectives for managing work and rewards


Tactical Strategic Identify business focus areas and required work acceleration/deceleration areas

Review work and reward strategy in light of changes in organization strategy

Reconnect with employees to understand what they value in the new environment

Optimize spend on rewards

Ensure protection for employees impacted by mandated closures and those in self-isolation and quarantine

Isolate work challenges to solve based on risk, cost, performance needs (e.g., independent vs interactive work)

Recognize and reward where it’s possible and needed most

Share and apply insights about work and reward impacts and solutions


Evolving market response: Pay priorities

Employers are increasingly taking actions that impact pay; others continue to evaluate options


Offering additional pay premiums for employees that must be physically present

Action Prevalence(Taken/Planned)

2-Week Trend(3/23 – 4/6)

Reducing salaries

Reducing or delaying merit increases

Freezing salaries

Reducing Board of Directors compensation

25%

17%

26%

19%

10%

+11%

+10%

+9%

+8%

+7%

Source: Willis Towers Watson Surveys - 2020 Cost Containment and Premium Pay Considerations, 2020 Managing Cost & Pay Practices


Context should inform design response


Pay for time not working

Work and Rewards Tactics Closed facilities

Effects of the crisis

Facilities in high demand Shutdowns / slowdowns in supply chain

Low cash reserves, debt obligations

Deferred pay

Premium pay

Redeployment/reskilling

Commuting, childcare and remote-working subsidies

Spot awards, recognition and/or retention bonus

Temporary assignment pay

Adjustments to incentive design

Introduction of interim incentive programs

Merit increase budget adjustment

Compensation budget modeling


Implications for short-term incentive compensation


The majority of employers are taking a wait-and-see approach relative to adjusting incentive plan design

Some have taken action, including:

Planning to use discretion Adjusting goals or delaying goal setting Providing guarantees (sales)

Most are evaluating options and/or planning action, considering the required balance between “motivate and engage” vs. “manage cost and rebalance the deal.” Relevant factors are:

Financial impact Social considerations Competitive landscape Historical practice Motivational impact

Adjustments will need to take into account potential constraints, including: CARES Act, 162(m), 409A, disclosures, etc.

Likelihood of bonus payout

Advice Potential actions for annual incentives

Still viable Be patient Develop contingency plans

Evaluate impact of adjustments

Remote Be nimble Consider reducing the threshold

Consider use of discretion

Virtually nil Be creative Consider split performance year

Assess other metrics

Consider discretionary plan

Discuss alternatives with stakeholders

Source: Willis Towers Watson 2020 COVID-19 Survey: Implications for 2020 Incentive Plans & Sales Compensation


Treatment of executive compensation will evolve as understanding of economic impact improves


Take a long-term perspective

Balance alignment between stakeholders and executives

Consider the symmetry of business impacts

Maintain your underlying compensation philosophy

Focus on a holistic approach and materiality

Guidance

Market activity to date

Fixed compensation – Reductions mostly follow economic impact

Performance-based LTI – Limited action; focus on adjusting goals

or planning to utilize discretion

In-flight LTI – Expect some discretion after weighing stakeholder

reaction and accounting implications

Proactively and effectively communicate and engage with all

stakeholders to manage optics of executive rewards

Monitor COVID-19 specific guidance from major investors and

proxy advisors

Understand limits on executive pay associated with CARES

Act loan decisions

Actions to consider


Companies need to design a program that is customized to balance their business needs with their workforce needs as it relates to pay, cost containment and benefits

10© 2020 Willis Towers Watson. All rights reserved. Proprietary and Confidential. For Willis Towers Watson and Willis Towers Watson client use only.

Balance the need to move quickly with the need to have all relevant stakeholders involved in the design and implementation

Model potential furlough/workshare scenarios to understand impact on cost containment and employees

Monitor federal and state regulations

Prepare necessary communications to guide employees through this pandemic

Actions to consider

Additional $600 weekly benefit up to July 31, 2020

Extends unemployment coverage by 13 weeks

Employees must first be eligible for state unemployment benefits

CARES ActType of Furlough

Impacted Population

Duration of Furlough

Pay Impact

Benefits


Evolving market response: Talent implications

Many organizations are contemplating action beyond hiring freezes


Freeze or reduce hiring

Action Prevalence (Taken/Planned) 2-Week Trend (3/23 – 4/6)

Implement involuntary unpaid leave or furlough

Eliminate or reduce hiring of seasonal workers

Reduce the use of contract workers or other non-employee populations

Offer voluntary unpaid leave of absence or furlough

68%

23%

35%

31%

20%

+20%

+10%

+8%

+7%

+6%

Implement layoffs/workforce reductions 23% +6%

Source: Willis Towers Watson Surveys - 2020 Cost Containment and Premium Pay Considerations, 2020 Managing Cost & Pay Practices


Using work redesign as a response to the COVID-19 crisis


Automate

Provide Financial SecurityProtect Physical Health

Make Work Portable Use Non-Traditional Talent

Borrow or Lend TalentShift the Where of Work Shift the When of Work

Insurance company redesigningCustomer Service job to increase use of automation for 15% productivity gain in call handling

Energy distribution company identified 8% of Advisor work to be moved to freelance talent

Financial services company re-deploying reporting activities to central services and mobilizing agile teams for customer-focus

Utility company shifting field operations’ data collection work to data center

Technology company implemented new work schedules such as “same team shift-work” to minimize on-premise exposure risks

Airline baggage handlers moving to eCommerce logistics in talent exchange


Companies can reset and grow by deploying work to the right talent at the right cost


Planning and DesignWork and Rewards StrategyAnalysis

Return on Investment

Cost savings identified

Clear definition of where great performance matters

Roles critical to driving great and good performance

Identify immediate cost savings opportunities

Determine which areas require great vs. good capability andwhich roles influence these areas

Optimize total rewards Evaluate impact on financials and the employee experience

Reinvent jobs to access the best work options at the right cost

Embed in HR’s core capabilities and toolset

Optimization of cost to meet near and long-term goals while balancing the impact on employee experience

Redeployment of work to achieve a step change in cost and capability

Realize these gains at scale


In action: Evaluate the agility and resilience that will sustain your organization


Total Cost

USD 2,000,000

USD 760,000

Total Saved Cost

USD 1,240,000

Total Time Saved

62%

Summary of Work Alternatives

Substitution 60%

Augmentation 40%

Alternative Talent 0%

None 0%

Summary of potential technology for Automation Alternatives

52%

10%AI

RPA

Source: WorkVueWillis Towers Watson technology for reinventing jobs



Prepare for the journey forward

Health Wellbeing Pay RetirementWork Employee Experience and Communication

Culture

Initial reaction and adaptation in key areas, followed by a period of sustaining operations, leading to a continuous cycle of additional reaction, adaptation, and sustaining as more is learned and conditions change

Resetting and reimagining operations under new assumptions, protocols, focus areas and pace, and helping bring people back to work

Resuming sustainable operations and business model, and redefining what normal means in the new environment

Key Stages of ActionThere are three distinct phases for organizations and their leaders:

Sustain

1Managing through the crisis

2Restoring stability

3Operating post-crisis

Download Global crisis: Human capital road map from willistowerswatson.com



Questions

April 22

Employee Experience

Please join us to continue the conversation

Listen to past events:April 2: Workforce and Business Implications

of the Coronavirus

April 7: Health and Welfare Programs

April 9: Retirement Programs

Access past recordings and register for future events.


A Deeper Dive into Work and Rewards Implications of COVID-19

April 14, 2020

Willis Towers Watson Webcast

© 2020 Willis Towers Watson. All rights reserved.

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