This CHRO South Africa webinar looked at how Covid-19 has changed remuneration practices.
On Friday morning, 12 June, CHRO South Africa hosted the first of its Webinar series with Emergence Human Capital CEO Raun Smythe unpacking the evolution of salaries, rewards and benefits during and after Covid-19.
Raun referred to a survey done by Emergence Human Capital with the objective to identify where there was a void of data that existed around reward practices, and what needed to be done to create a positive and lasting impact in a number of organisations.
The first thing the survey looked into was how much, if anything, were business owners and shareholders going to give in terms of increases.
“Organisations are still trying to adopt a wait-and-see approach around increases,” Raun said. “I think that’s probably got something to do with budgets, as we don’t understand the impact financially that Covid-19 is going to have on our businesses yet, and certainly not in the medium-term.”
However, Raun pointed out that while increases that are still being granted in the market are going down by a significant amount, CPI has gone up. “So what this means is that the relative standard of living for individuals is going to be decreasing even for those people that are still getting increases.”
And, according to the survey, 40 percent of people in a corporate environment are not going to be getting an increase this year 60 percent of people in an SME environment are not going to bet getting an increase in 2020.
“What we’ve seen is that the corporate environment is still very much interested in knowing what the appropriate level of pay is during the crisis, but instead of asking ‘are we paying enough to retain our staff?’ they’re asking ‘are we paying too much currently?’,” Raun said. “Our advice here would be for organisations to review the process that you take and the factors you use in determining increases, like company performance and individual performance, and replace them with the value created by the employees.”
The survey also asked top management in businesses whether they were going to be taking a pay cut. The results were that 92 percent of SMEs and 55 percent of corporate executives are going to be affected by pay cuts of 30 percent.
“Our recommendations here are to develop those forecasting models and try to understand where the business is going to be,” Raun said. “This means that HR and finance are going to have to work hand in glove to try and understand exactly what they’re going to be doing in terms of those top management pay cuts.”
A lot of people rely on their bonuses for financial activities like servicing debt. “In this period, we’re starting to see up to 70 percent of bonus payments are being cancelled, whether you work in corporate or an SME,” Raun said.
Like with increases, Raun said that individual performance is likely to play a significant part of the decision to cancel bonuses, because you don’t want to demotivate the people that are still driving value for your business.
According to the survey, 52 percent of SMEs and 21 percent of corporates are deferring bonuses.
“Organisations are reviewing their bonus structures to align more to market conditions and self-funding principles,” Raun said. “This means, any honour on a bonus system should place the individual in a better space based on the achievement of certain goals. Organisations need to rather ensure that those goals are more aligned to the new market conditions.”
According to the survey, 80 percent of SMEs and 50 percent of corporates are going to be considering withholding dividends. This will impact shareholders quite significantly.
“One of the recommendations here is to conduct cashflow and pipeline profitability forecasts,” Raun said. “This is where HR and finance, and now sales, will need to come in and say ‘our pipeline is looking strong’.”
Lastly, the survey looked at how benefits were changing in corporate and SMEs according to the new working environments that Covid-19 has created. Raun pointed out that companies were giving their employees a bit more flexibility to manage their working and home life, especially for employees who have to teach their children.
Some employees also received cellphone and internet allowances, as well as technology to enable them to work from home.
Having looked at how Covid-19 has impacted increases, bonuses, benefits, and dividends, attendees were asked to put forward a couple of questions for Raun.
The questions posed by the audience will be answered by Raun in a follow-up article.