Skilled migration: A new paradigm for Government

Unprecedented times call for unprecedented rewards

How COVID-19 has reshaped our approach to staff rewards.

by Emma Grogan

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Business and HR leaders have been questioning the effectiveness of ‘traditional’ reward and remuneration strategies for some time. Even before the COVID-19 pandemic, the rise of new and flexible ways of working and ‘agile teams’ was challenging the status quo.  

But just as COVID-19 has accelerated a shift to remote work, so has it accelerated different approaches to reward. Ideas that have long been hotly debated or put in the too-hard basket are now on the table. And companies are starting to put them into practice.

So, what’s different? Here are six key reward practices we have observed take-off during COVID-19:

More ‘egalitarian’ bonuses

With employee wellness emerging as a priority, some businesses are taking a more egalitarian approach to bonuses. Several have decided to distribute cash-based bonuses not based on performance, job level or salary. For example, Bunnings announced that full-time staff in Australia and New Zealand would receive up to an extra $1000 cash plus gift cards - based on hours worked not performance. Facebook applied an ‘exceeds’ rating to all staff for their first six-month review in 2020, meaning all workers will have a guaranteed bonus. In part, these companies are recognising the financial impact of the pandemic on their workforce and are seeking novel ways to address it.

‘On-the-spot’ bonuses

With many businesses strapped for cash, end of year bonus pools have been reigned in or cancelled altogether. At the same time, leaders still feel the need to explicitly recognise employees, particularly with people working at a distance. We’ve noticed a rise in on-the-spot bonuses being paid to individuals or a group for a specific behaviour or outcome. Companies that do this well agree at the start of the year on a budget that people leaders can allocate when and how they see fit. On-the-spot bonuses can provide employees with a morale boost when they need it the most and are an excellent option for companies that aren’t in a position to afford to pay big bonuses this year.

Less cash, more equity

Given cash constraints, some ASX-listed companies are seeking to reward (and hopefully retain) talent via deferred equity rather than cash. Several firms have paid annual executive bonuses with a smaller portion in cash and larger portion in equity, or even solely in equity. This practice is also occurring at the employee level. For example, Woolworths recognised the efforts of its employees during one of its most challenging years by giving eligible full-time staff (approx. 30,000) up to $750 of Woolworths shares, regardless of their salary level. Part-time staff (approx. 70,000) were also allocated shares on a pro-rata basis.

Rewards for hard work

At the end of a ‘normal’ year, leadership teams sit around a table and debate who is more or less deserving of an annual bonus. Typically, an individual who is pitched as bonus-worthy because they ‘worked really hard’ will be challenged by others: “Yes, but did they actually achieve results or great outcomes?” But this is no normal year. Instead, we noticed companies acknowledging the fact that sometimes effort should be recognised, regardless of the end result. Numerous examples of this attitude were observed, particularly in the retail space. Coles, Costco, and Australia Post paid one-time cash ‘pandemic’ bonuses simply to acknowledge hard work and team effort.

Leaders given more authority to decide bonuses 

Logistics for end-of-year bonus calibration and moderation sessions are monumental and can take up a good 4-6 weeks. But with fewer - or no - leaders in the office this year, many companies took to the opportunity to streamline the process substantially. Some simply handed back decision rights to leaders after a pool had been established. Less focus was put on a central calibration process to ‘moderate’ recommendations. More leaders were trusted to make the ‘right’ call based on their intimate knowledge of their team members’ contributions, as well as retention and flight risks. Companies typically maintained governance checks to ensure diversity and fairness, but this became the minor part of the process, rather than what often feels like the most significant part of the process. 

Geographic pay differentials 

Taking the cost of living in different locations into account when determining pay is not new. Whilst in recent years it has been a less common practice, remote working has brought the conversation around geographic pay differentials back in vogue. Some companies are considering customised pay bands to attract talent based in remote locations, or for employees that choose to move to areas with a lower cost of living to perform their same role.

All these new and emerging reward practices have been borne, enhanced or accelerated, out of a crisis. But many simply now make sense given what we’ve long called the ‘future of work’ has suddenly arrived.