How COVID-19 is Impacting Competitive Pay and Preparing Your Strategy


There are countless as-yet unknown ways the COVID-19 pandemic will radically change the ways we all work and live. One looming question on the minds of a nervous workforce is whether wages and competitive pay will be impacted by the disruption of economic activity. Here is a run down of contemporary thought on the matter and some good advice on how to proceed if your organization determines changes to compensation are necessary.

From a macro perspective, we might expect to see wage increases in industries that are booming during the pandemic. Think “hero pay” for front line healthcare and other essential workforce elements. Conversely, hard-hit industries like travel and hospitality are likely to have to cut pay if not lay off workers altogether. Upon recovery, these hard-hit industries may not be able to support pay rates at previous levels due to diminished financial wherewithal.

In this article in The Week magazine, it is suggested that large players in any given industry will likely be the ultimate beneficiaries of the virus as they can sustain operations through the turmoil and survive until commerce returns. Whereas the smaller, independent businesses will be decimated. The Week’s Noah Millman writes, “Chain restaurants are in a position to consolidate more of the restaurant dollars as independent restaurants go under. Amazon is poised to destroy even more physical retail. And so forth.”

The National Law Review offers some guidance for organizations facing difficult decisions regarding modification of worker pay. In a May 1st blog, NLR says, “In implementing salary or wage reductions, companies should be mindful of federal, state and local wage and hour and labor laws, consent and notice requirements under contractual agreements with individual employees or groups of employees, tax implications on subsequent “make-whole” or “make-up” payments, impact on employee benefit plan participation, governance considerations, and disclosure requirements for public companies.”

The post goes on to offer detailed steps that can and should be taken before engaging in salary or wage reductions including:

  • Identifying employees that may be affected and reviewing the state/local laws that govern such actions.
  • Reviewing the possible ramifications of such reductions as laws may require and performing reviews of contracts, agreements, offer letters and benefits plans.
  • Developing plans to execute waivers, inform employees, provide guidance on changes to benefits plans and disclosing salary reductions in a fashion compliant with applicable law

Read their exhaustive post linked above for more details on each of these steps.

Employers should be aware of the requirements emerging in many states and cities requiring companies to inform employees in advance of any salary or wage reductions being planned. Different local/regional laws mandate differing numbers of days’ notice required for such announcements.

If your organization has operations across multiple states, it is prudent to check with the appropriate labor boards/councils to ascertain what must be done to act in accordance with the law. They should also pass their proposed actions and announcements through their internal legal counsels to validate the legality of the messaging prepared.

nextSource experts are available to help your organization navigate this difficult process. Reach out today for assistance to ensure proper compliance for your workforce management operation. We have consultants standing by.

To read more on this subject

More Articles