Rewards after the Pandemic: The balanced thoughts of an expert group

My Thursday

I woke early last Thursday to another morning of mixed, ‘up and down’ media headlines on the coronavirus crisis - with hedge fund traders apparently making millions by shorting on the UK’s stock market collapse, whilst all our key social care workers apparently have to celebrate is the recognition of their critical role not through a cash bonus or pay uplift, but the award of a new badge , a ‘unifying symbol of pride in our social care champions’ from their Secretary of State. As Mayor of Manchester Andy Burnham dryly observed, ‘Of all the things that long-suffering social care staff in England most need, I would put a badge close to the bottom of the list’. Retired consultant Dr Kirsty Muirhead echoes the views of many of us in her letter in today’s Financial Times on the need ‘to respect and value carers, not just by applauding them, but by supporting their training and by increasing their pay’.

It is good to see that most employers seem well aware of the mental health challenges of permanent homeworking for those of us fortunate enough not to be in the front-line of Covid 19 care, with a quarter of them increasing their EAP resources in response according to REBA, as my 23 year old daughter and I are both experiencing our own exaggerated mood-swings as this lockdown continues.

But Thursday was, I am happy to report, an unambiguously good day, primarily because of the videoconference meeting that I hosted. Fourteen senior HR and reward professionals, policy experts, academic researchers and advisers joined me to look a bit beyond the immediate-term issues of employee communications and protection, furloughing and family support, in order to consider what the post-Coronavirus landscape for pay and rewards is likely to look like; and what we should be doing now to influence this in a more positive, upward direction.

Struggling at times to control young daughters and deal with the Zoom technology, this was far from being a meeting of idealistic leaders escaping their huge immediate demands of setting up processes and communicating details of furloughing schemes, family and mental health support. A quick twitter poll I conducted earlier in the week suggested that after this is all (whenever that is!) over two-thirds of us believe that the pay and rewards situation would return to its pre-crisis situation at best; and the other third that it would worsen for the majority of workers.

Balancing the desire and the deficit

So my discussants were all very aware of the negative economic and financial impact on their own employers and the wider economy and government finances of the pandemic, an immediate national hit that the UK hasn’t experienced according to one economist I read this week since the great freeze of 1707(?!).

One participant referring to the incredible contribution made by her company’s own keyworkers during the Crisis, with the majority paid the National Living Wage. But she admitted that she was ‘worried’ about the affordability of future pay awards in such a competitive sector and given local authority contracting budgets.

On the wider keyworker population of largely public sector workers, our views were equally well balanced. We agreed the cost of closing most of the economy is restricting the financial means to improve things post-pandemic, both for massively indebted governments and funding and profit-hit employers. Some thought we would see an increase in industrial disputes as these countervailing pressures come into play later in the year – we already have just come out of the Higher Education pay and pensions strike, while French trade unions are currently threatening strikes over low pay and lack of PPE for front-line workers in sectors such as retail.

But everyone felt we cannot as a society and responsible employers afford to repeat the itself unique and totally demotivating post 2008/9 scenario of a decade of pay austerity and real pay cuts, especially in the public sector and for the lowest skilled and young and female workers, just to try to rebuild the public finances. One public sector member observed ‘how brilliant government departments have been in response to COVID-19, it would be a disaster if they did that (ie a pay freeze) now…(although) they will need to start paying for some of this somehow!’.

We also highlighted the need to avoid the unequal post 2008/9 pay and conditions hit on minority groups, regretting the truly awful decision by the government to suspend this years’ gender pay reporting requirement, rather than just say relax it for 3 months, as has occurred with annual reports.

We all supported the implementation of the significant National Living Wage increase at the start of the month to benefit low paid workers and to continue to start to reduce the massively enhanced pay differentials and inequalities which have grown up in the UK over the past 30 years, despite the calls from some economists to freeze it (which may happen next year anyway). The OBR revised national economic forecast released earlier this week suggests average earnings will decline by c7% this year, but then recover strongly, in double figures, next year (although the OBR have spent most of the last decade over-estimating rates of earnings growth, especially for those at the bottom of the income scale).

A new social and employment contract

But more broadly, our views reflected the growing cross-political party, -class and -country clamour and consensus that we are hearing from everyone from the Pope to the Archbishop of Canterbury, Anneliese Dodds to Boris Johnson, President Macron to France’s largest trade union CFGT, the editors of the Financial Times, Daily Mail and Guardian, for a ‘new social contract’. As Shadow Chancellor Dodds put it this week, after the shared experience of Crisis and amazing contribution of our keyworkers, we cannot move forward in our society with millions of workers ‘one pay cheque away from poverty’. Or as the FT expressed it, ‘to demand a collective sacrifice on this scale you must offer a new social (and employment) contract that benefits everyone’.

Morgan Stanley, perhaps an unlikely advocate given their own huge gender pay and internal relativity gaps, were of much the same view commenting in a briefing note issued this week that the coronavirus has uncovered ‘huge divisions’ in labour markets around the world. Low-paid ‘essential workers’ such as those in nurseries, care homes, food factories and shops ‘must go out to keep the lights on and their fellow citizens fed, even though their jobs are often insecure and underpaid’ and they face much higher risks of infection. The bank points out that the increasing visibility of these inequalities will create pressure for companies (and states) to improve and enhance the safety net offered to employees and workers.

Prior to the crisis, nearly one-third of US workers did not have access to sick pay, and many part-time and gig economy employees had no access to unemployment insurance. With statutory sick pay standing at the princely sum of ￡94.25 per week, more than a million employees on zero hours contracts and more than 15% of the workforce largely unprotected and uninsured, self employed in the gig economy, the situation is little better here. The temporary raising and extension of these benefits in the Crisis raises the question, as Rishi Sunak recognised in launching his job retention and self-employed protection schemes, as to whether such schemes (with appropriate funding from taxation) should be retained once the virus has hopefully left us for good.

But genuinely valuing low-paid work will require us to go much further, via the government regulation and raising of minimum standards, giving a strong shot-in-the-arm hopefully for the government’s tentative ‘Good Work’ proposals from last year, including the creation of a new single enforcement agency and individual right to request a permanent contract (which should be a simple right). Yet while our group emphasised the importance of government action to improve employment standards and provide the right incentives, requirements and enforcement for employers to practice good people and reward management, the HR and reward community can itself influence individual organisations to move far further and faster in this direction.

We didn’t really have much time in our virtual meeting to get into the detail of reward actions and priorities required and desirable in response to this unique and scary situation we are all facing. Almost certainly traditional reward textbooks, like monetarist and deficit-reducing economics, need to be discarded.

A number of us hoped for (and want the crisis to increase the push for) enhanced transparency on reward and employment, and emphasised the need to keep the pressure up on ethnicity pay reporting. We could for example, be using the gender pay reporting portal to force employers to publish a much wider range of human capital statistics – numbers on ZHCs, on worker status, etc (and not just parental support policies, which is in train as part of the Good Work legislative proposals). Tom Powdrill of PIRC confirmed this is not only an HR/reward professionals’ issue, but part of the move which many in the investment community are behind, of wider ESG reporting and moving firms to pay attention to an all-stakeholder, not just a shareholder, agenda.

Will the temporary cuts in the stratospheric pay of some senior executives we have seen in the last few weeks become permanent, or will the still majority ‘no action’ stance prevail? I certainly hope for permanent falls, with the current situation showing ‘the incentive model is broken’ according to one discussant. But without further government action to follow pay ratio reporting, most doubted that this would happen on any widespread basis, especially as, disgracefully, only a minority of executive have so far taken cuts.

We all supported more encouragement for profit and gainsharing plans and mutual and co-operative employee ownership, perhaps with French-type tax breaks, so that all employees and not just executives get the chance to share in the gains of improving performance during the economic recovery to follow.

Making change happen

We’re in a position to influence this’

There is a serious danger the group felt, that HR professionals just continue to deal with all their immediate hard work on security and protection for employees; and then breathe a sigh of relief, return to their office and the day job and the ‘newish normal’ as soon as possible thereafter.

Yet the scale of this crisis, the ‘huge shock’, is raising fundamental questions about relative pay and security in society and shifting attitudes to keyworkers. We all do want to see the opportunity taken for a ‘new new normal’ to emerge; and we need to address and advise on these bigger questions as a reward expert community.

Feminist author of books including ‘Paradise built in Hell’, Rebecca Solnit observed last weekend that:

‘In the midst of fear and isolation, we are learning that profound, positive change is possible. Ordinary life before the pandemic was already a catastrophe of desperation and exclusion for too many human beings, an environmental catastrophe, an obscenity of inequality. It is too soon to know what will emerge from this emergency, but not too soon to start looking for chances to help decide it. It is, I believe, what many of us are preparing to do’.

One of my group members sent me a lovely email after our virtual meeting, thanking me for the really useful forum and adding,

 ‘What would be really useful - when the lockdown eases (and I know that seems a long way off) - is to create a group/movement/consortium within the HR/reward community to start to look collectively at these issues, to guard against a knee-jerk return to the status quo and to advocate for seizing the opportunity to create a more equitable, collective, compassionate approach to pay and people management more generally’.

So come and join the movement!

Copyright: Duncan Brown