COVID-19 Creates Unique Compensation Challenges for Retail and e-Commerce Firms

Published: March 2020

 

From keeping warehouses and supply chains running safely to adjusting pay for employees interacting with the public to supporting workers furloughed due to store closures, retail and e-commerce firms face a range of compensation challenges not shared in many other sectors.


Relative to much of Asia and countries like Italy, North America is still in the early days of combating the COVID-19 pandemic. However, for retail and e-commerce companies in this part of the world, the workforce and compensation impacts of COVID-19 are already acute. In just the last two weeks, HR leaders have had to quickly take action on a range of issues, including furloughing workers at closed stores, adjusting sales incentives, and developing special pay programs for associates in essential roles (e.g., pharmacists and grocery workers), all while contemplating broader changes to pay and benefits programs for hourly workers who may be working many hours or none at all.

In mid-March, we connected by video conference with HR and compensation leaders at more than 20 leading retail and e-commerce firms to learn more about how they are adjusting to daily events on-the-fly. This article, while not a comprehensive assessment of market practices, summarizes key themes from our conversation and provides insight into where other companies in the sector will likely head next. We also recognize the COVID-19 pandemic continues to unfold, so we remind readers that our conversation represents a point in time in what is an ever-changing environment.

For a more comprehensive look at emerging workforce and rewards practices in response to the COVID-19 pandemic, readers can download the results of our recent pulse survey of more than 2,000 organizations in North America and Europe, conducted between March 17-20, by clicking here.

Special Pay for Employees in Essential Roles

Several retail clients we spoke with said they are thinking about providing additional compensation to employees who are still working and interacting with customers in pharmacies and grocery stores and supporting increased demand in warehouses. While some firms are still determining the premium amount, there is a strong desire across the industry to recognize the extra contributions of workers during this time. Walmart Stores announced in a March 19 press release that it was giving a one-time bonus of $300 for full-time hourly store workers and $150 for part-time associates. The company is also accelerating the payment of its Q1 quarterly bonus for all eligible employees. Many other retailers have announced similar measures.

Some of the companies we spoke with are still deciding what to call this type of special compensation. “Labeling additional compensation as hazard pay could make the work seem overly dangerous to employees and send the wrong message that the company isn’t looking out for their safety,” says Kelly Voss, partner in the Rewards Solutions practice at Aon. “At the same time, there is a need to recognize employees for their significant contributions and inherent risk given this crisis.”

Paid Leave for Furloughed Employees

Stores across the country have been ordered to close to the public temporarily. In response, many of our retail clients say they are continuing to pay impacted employees while stores are closed but are taking a wait-and-see approach in determining how long they do so.

Several large retailers say they are initially providing furloughed workers with two weeks of full pay and benefits but, beyond that, they are unsure. One HR leader at a large retailer said their firm is providing full pay for employees through the end of April at stores that are closed but is waiting to see whether they will extend this if stores are closed longer.

While layoffs or furloughs are occurring, many retailers are identifying new market opportunities in the midst of the crisis and have restructured their jobs accordingly. And in some well-documented cases, retailers — particularly those providing essential goods — are adding additional staff to capture demand. “While there is a need to preserve cash, employers should do their best to take a longer-term view and preserve key members of their workforce,” says Rachel Silverman, associate partner in the Rewards Solutions practice at Aon.

Implementing Flexibility and Increased Time Off

More than most other industries, retail and e-commerce companies need to examine their attendance policy as many employees don’t have the option of working from home. Clients we spoke with are relaxing their attendance policies, providing flexibility in schedule changes, implementing additional sick leave and exploring back-up childcare options for employees while schools and daycare facilities are closed.

On average, our clients report adding between five and 10 days of additional sick leave for all employees. Companies with furloughed workers are planning to keep additional sick leave in place when stores reopen, reflecting the reality that even after social distancing rules are relaxed, there could still be waves of outbreaks until a vaccine is available. As such, retail and e-commerce companies are identifying which types of total rewards should be enhanced and extended for a longer period of time. More than three-quarters of North American respondents (78%) in our recent pulse survey said they have already augmented family care benefits, including sick leave and childcare allowances.

Hiring Approach

Most of our retail and e-commerce clients are contemplating a hiring freeze but have not yet instituted a formal policy because the situation is rapidly changing. Companies that are moving forward with hiring are utilizing video capabilities to interview candidates and are finding that the process and technology has been effective so far. (To learn more about using video technology to conduct virtual interviews, click here.)

One HR leader at a retailer with thousands of brick and mortar stores across the U.S., said all sales associates extended job offers prior to store closures will continue to be onboarded, but beyond this, they have implemented a hiring freeze until stores reopen. Across all industries, 58% of North American respondents to our recent pulse survey report a more cautious hiring outlook and 17% see potential for downsizing. We anticipate these figures could become more pessimistic as we enter the second quarter of the year. 

Incentive Program Changes

The companies we spoke with are contemplating a number of changes to their short- and long-term incentive plans, including adjusting goals and metrics, modifying funding, reassessing sales quotas and more. However, our broader pulse survey finds only 10% of respondents across all industries are considering changes to their incentive plans currently. We expect this to change in the near term as companies have a better indication of their financial outlook.

Most of our large retail and e-commerce clients have not broadly announced their 2020 annual goals to internal stakeholders, which provides them added time to assess how they need to be modified. One idea is to split the annual incentive plan into two six-month periods, with the first half of 2020 likely looking much different from the second half of the year.

“The critical thing is to preserve cash right now, so we are looking at making changes to other programs that can help achieve this goal,” one of our clients remarked. Some changes companies have already made include suspending or decreasing 401(k) contributions, delaying voluntary separation programs and canceling work-related travel.

When making these types of difficult decisions, it helps to emphasize and communicate other benefits that employees do receive. In some instances, companies are adding new health benefits, such as telemedicine and mental health support. In other cases, businesses are reinforcing underutilized employee benefits and communicating some of the public resources being made available during this time — from complimentary online fitness classes to backup childcare.

Additional Resources from Aon

 For more information about how businesses are responding to the current pandemic, including stakeholder communication, health and benefits impacts and business continuity planning, please see Aon’s COVID-19 Response Site here.

To download complimentary results of our pulse survey on Navigating the Impact of COVID-19 on Workplace and Rewards Practices in North America and Europe, please click here.

For more information about how total rewards are being impacted by COVID-19 across all industries, see our recent article Considerations for Your Total Rewards Strategy in Response to COVID-19

Finally, if you have any questions about the topics discussed in this article, please reach out to one of the authors or write to rewards-solutions@aon.com


COVID-19 Disclaimer: This document has been provided as an informational resource for Aon clients and business partners. It is intended to provide general guidance on potential exposures, and is not intended to provide medical advice or address medical concerns or specific risk circumstances. Due to the dynamic nature of infectious diseases, Aon cannot be held liable for the guidance provided. We strongly encourage visitors to seek additional safety, medical and epidemiologic information from credible sources such as the Centers for Disease Control and Prevention and World Health Organization. As regards insurance coverage questions, whether coverage applies or a policy will respond to any risk or circumstance is subject to the specific terms and conditions of the insurance policies and contracts at issue and underwriter determinations.

General Disclaimer: The information contained in this article and the statements expressed herein are of a general nature and not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate ni the future. No one should act on such information without the appropriate professional advice after a thorough examination of the particular situation.