“Companies are increasingly expecting that the coronavirus will adversely affect their businesses. Yet, because the exact impact of the virus is uncertain, compensation committees and executives are not making immediate changes to their organizations’ pay programs — at least for now,” said Adrienne Altman, managing director, North America head, Rewards, Willis Towers Watson. “Instead, companies are prioritizing the physical and financial wellbeing of their employees, and rightfully so.”
One-third of companies (34%) surveyed during the week of February 24 expect the virus to have a moderate or large negative impact on their business over the next six months; 20% expect a moderate or large negative impact over the next year. A similar survey conducted a week earlier (before the stock market dropped) revealed fewer employers were expecting a negative impact — 15% over six months and 12% over the next year.
(It’s important to note an earlier survey reflected responses from benefit managers, with compensation managers responding to this second survey. While the results may reflect differences in the respondents’ responsibilities and perspectives, they also align with the growing concern and uncertainty reflected in the stock market volatility during the second survey.)
According to the survey:
Over four in 10 (44%) companies say their annual executive incentive plan has been or will be affected by COVID-19, but nearly one in five (19%) intends to adjust funding or targets for the plan.
Almost half of respondents (46%) that intend to make adjustments plan to maintain the current design of their annual incentive plan but reserve the right to make discretionary changes at year-end when the full extent of the impact is known. A similar number (44%) have yet to discuss the impact of COVID-19 on their short-term incentive plans.
Only one in three (35%) companies that offer long-term incentives anticipates an impact to its long-term incentive plan. The vast majority of those do not intend to adjust performance goals or metrics at this time.
Three-quarters (75%) of companies do not plan to make adjustments to their sales compensation plans. Among those considering adjustments, most plan to apply discretion, if needed. “The concern over the economic impact of COVID-19 is growing and being felt all around the world. As companies grapple with the volatility of financial markets and the effects of COVID-19 on their business and employees, we expect they will closely monitor how to align compensation, as well as their broader HR policies and practices, including merit increases,” concluded Altman.
About the survey
A total of 204 companies, of which 86% of the respondents were multinationals, participated in the Willis Towers Watson COVID-19 Survey, which was conducted during the week of February 24, 2020. Respondents employ nearly 3.1 million workers.