How COVID-19 changed pay rates
The COVID-19 pandemic has irrevocably changed global workspaces: where we work, how we work, and the pay we get for our work. With stay-at-home orders meaning less income, organizations had to make the hard decision to lay off many of their employees. A 2021 report by the International Labor Organization estimates that approximately 345 million full-time jobs were lost globally by the end of 2021, resulting in an economic crash.
In addition to lay-offs, many employers had to reduce wages and salaries to compensate for income loss. According to the Society for Human Resources Management, 25% of American organizations reduced their staff's pay. Many organizations could still afford to pay merit increases and paid bonuses, but overall increases were, understandably, lower than usual.
These changes in employment and pay have had a long-lasting impact on the ways organizations pay their employees and what employees now expect from employment and pay rates.
Organizations are reconsidering how they pay top performers and executives
Many employers realized that they need to focus on the wages and salaries of their highest performing employees. Tom Gimbel, CEO of Nashville-based staffing agency LaSalle Network, has remarked that if an organization doesn't want to lose its top quarter of employees, they need to receive increases or other benefits. That said, management needs to consider how it continues to pay increases to organization executives when lower-ranking staff are forced to take home decreased pay.
Some organizations have increased pay to attract new hires
Apart from lay-offs, organizations worldwide have been experiencing what's being called the "Great Resignation," a phenomenon whereby employees are leaving companies in droves at rates never seen before. Resignation rates are at their highest in notoriously low-paid industries like retail and food service.
To prevent or compensate for employee losses, many organizations have decided to increase pay rates to keep current employees and attract potential replacements for employees who have resigned. For example, in July 2020, Target raised its minimum wage to $15/h and rewarded front-line employees with a $200 bonus. According to a 2021 study conducted by the US Bureau of Labor Statistics, nearly 25% of private-sector organizations increased wages or salaries, or paid bonuses. The hospitality and information technology industries saw the largest pay increases.
Other organizations subsidized employees working from home
In an effort to curb the spread of coronavirus, most governments implemented stay-at-home orders which forced non-essential employees to work from home. A number of organizations decided to subsidize office equipment and furniture that employees needed to make the shift to remote work. For example, search engine giant Google and social media monolith Twitter decided to give employees working from home an additional $1,000 stipend to purchase the products they needed to work remotely.
The bottom line
Almost two-and-a-half years into the COVID-19 pandemic, employees have begun to see their economic worth. In response, many employers worldwide have realized that higher wages or other kinds of compensation — perhaps even at the expense of organization executives' salaries — is how they're going to attract and retain the talent and labor they require.