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Small business: Slim pay hikes likely in coronavirus world

Stephanie Horn, president of Synergy Professional HR Consulting

Stephanie Horn, president of Synergy Professional HR Consulting in Plainview,  says about salaries in the coronavirus world "if revenues are impacted, increases will obviously have to be reassessed."    Credit: Stephanie Horn

The long-term effect of the coronavirus on wages won't be known for some time, but even before this national crisis, 2020 salary increases were expected to be modest.

It appears more employers are likely to keep hikes at 3% or less this year compared to last. According to recently released survey data from Seattle-based PayScale, the number rose from 67% to 71% of employers.

 With business headed into a recession,  those numbers may  be impacted, experts say.

And whether there will be any pay increases at all is as uncertain as the times.

“It’s likely that companies will do some hard analysis on their workforces to identify their top performers and key occupations and devote their budgeting towards keeping those employees engaged and retained,” said Sudarshan Sampath, director of research at PayScale.  The compensation software and data company gathered survey responses from last November to January.

 Stilll, Sampath said, there will likely be significantly less hiring and lower budgeted salary increases in industries especially impacted by the coronavirus, such as travel, restaurants, entertainment and manufacturing.

  Supporting a lean outlook  is WorldatWork’s 2019-2020 survey, which had U.S. salary budget increases projected to be 3.3% on average in 2020.

But that could certainly change.

“While some [organizations] have already communicated salary increases to employees, others may be in the early planning stages and have not yet determined or awarded them for 2020,” said Sue Holloway, a strategy director at WorldatWork in Arizona, a nonprofit professional association in compensation. “As organizations respond to the rapidly evolving coronavirus crisis, they will review their financial situation and human capital needs and make necessary adjustments.” Therefore, salary increase budgets may be impacted, she said.

So may the  number of companies planning increases. In most years, about 90% of employees receive raises, said Ted Turnasella, principal of Comp-unications, West Islip compensation consultants. But in his experience, he said, in past instances where the economy has been impacted by sudden negative circumstances, the number of companies giving raises has dropped to as low as 50%. Pre-coronovirus outbreak, most clients he has worked with were budgeting salary increases around 3.0% to 3.5%.

But it’s yet to be seen how this will play out, he said. “If it’s a short-term downturn for some companies, they may be able to recover before year-end,” especially if proposed federal financial aid packages being discussed in Washington are provided to the business community, he said.

But in general, said Holloway, to foster pay and workplace equity, organizations should conduct a regular analysis to address any pay concerns and resolve underlying issues that are a barrier to equity. According to PayScale’s report, 38% of organizations plan to conduct a pay equity analysis (racial, gender or both) in 2020.

Undoubtedly, it’s important to have an up-to-date compensation structure, said Stephanie Horn, president of Synergy Professional HR Consulting in Plainview. In New York it’s illegal to ask for previous salary history, so if companies mistakenly relied on that, they need to use other means to set compensation, said Horn. If small businesses are unable to do a formal analysis themselves,  she said, it would be wise for them to enlist the help of an employment attorney and compensation pro, because businesses are still responsible for ensuring they’re not discriminatory.

 Of course, she noted, now there’s uncertainty with the coronavirus and even if increases were budgeted, “if revenues are impacted, increases will obviously have to be reassessed.”  Companies can use other perks, she added, to entice employees, like remote work, flexible schedules and paid time off.

Those kinds of perks are growing in popularity. Remote work, in particular, is now widely encouraged, if not mandated.

In best practice in general, it pays to look at your whole compensation package and try to be as transparent as possible about your pay/compensation practices, said Wendy Brown, PayScale’s director of content marketing. “When employers have a little more transparency into what they’re paying and why…and communicate that to employees, it really lands well and they’re more likely to stay.”

Fast Fact

57%

Percentage of organizations that completed a salary market survey in the past 12 months

Source: PayScale

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