Kumar Kymal, Managing Director and Head of Compensation and Benefits at BNY Mellon was the featured guest on i4cp’s weekly Total Rewards Action Call on September 24th. Kymal and call facilitator Mark Englizian discussed the effects of the pandemic on bonus and incentive plans.
Key takeaways from the call:
- Executive pay cuts or give-backs –
substantive or gesture? Most give back has been on base pay, says Kymal,
with some CEOs take a percentage cut, or some completely forfeiting base pay.
But since base pay is a fairly low portion of overall compensation, he says the
effect was pretty minimal. He cited an example of a CEO whose base pay was
$900K, but whose overall compensation was $15 million.
While calling such cuts broadly symbolic, he added context by noting that the cuts have largely taken place in industries in which furloughs and layoffs were more prevalent and CARES Act aid was being sought. So companies needed to “align from a messaging perspective to protect themselves.”
- Essential workers are in the spotlight. Kymal
pointed out that the CARES Act represented the first time that the government
connected aid to companies’ keeping employees on payroll. Further, he says,
most companies didn’t realize the importance of essential workers prior to the
Heightened focus on those essential employees has also illuminated salary inequities and upped the conversations about gaps between employees and executives. Despite that, Kymal says that based on historical experience, he doesn’t expect permanent shifts in thinking about driving those gaps down.
At the same time, he does see the focus on essential workers and their pay and benefits as being more long-lasting. Further, he says the pandemic has increased interest in companies’ providing better protection for lower-paid employees with regard to their required contributions for benefits and matching of 401k contributions. Emphasizing this as a well-being and safety practice is also growing.
- Some organizations provide special bonuses or pay subsidies to essential and other workers in response to the pandemic. Discussions in the meeting chat confirmed that one organization provided employees earning <$100K with bonuses of $1,000 to ease the strain of the pandemic. Another added an hourly pay premium and monthly spot awards for frontline managers. A manufacturing firm did one-time $1,000 bonuses for employees. Others also provided subsidies or other awards.
- When special bonuses or subsidies have been
paid, how are companies ending those arrangements? Some companies on the
call noted that they paid premiums during early months of the pandemic, then
ceased them as situations stabilized or businesses began to reopen.
Setting expectations in advance emerged as an important strategy. One call attendee explained: “We provided appreciation pay and gave a timeframe at that time, so when we removed it employees knew that was coming and we did not receive pushback.”
At another firm represented on the call: “We communicated the premium pay with reasons and were able to tie the removal to those reasons. For some groups, those reasons still exist so we have not removed. [But] the longer they remain, the harder it will be to remove without some noise.”
Also on today’s call
- An instant poll during the
call asked attendees to choose from several
statements the one best describing their organizations’ decisions regarding
bonus payouts in 2020. Following are the top responses:
45% We will adhere to the plans as designed, and pay out according to target vs. actual performance
18% We adopted COVID-related adjustments to the plan (or targets) and will pay out on actuals against the revised plan/targets
12% Our financial performance has been significantly impacted, and we do not expect to see any bonus payouts
The recording of the session and its
full range of discussion topics is available at i4cp’s Employer Resource Center, which also provides the latest research and
practices to help organizations support their employees and respond effectively
to the COVID-19 pandemic.