COVID-19 Impact on Incentive Compensation


  • COVID-19
  • Incentive Compensation

The COVID-19 pandemic’s impact on our daily lives has been unprecedented. Organizations are scrambling to realign their businesses to adapt to the challenges of a global pandemic. For those companies with incentive compensation, employees and managers are already speculating how the virus will affect their upcoming bonus cycle. Now is the time to start looking at how you can adjust your compensation program to accommodate the changing economic conditions. This blog is the first in a series looking at how COVID-19 is affecting compensation and what that means for organizations.

Impact of COVID-19 on Annual Bonuses

Annual bonuses are commonplace for organizations across all industries. For those utilizing performance targets, the current economic environment has made those targets unattainable for many in a matter of weeks. How can organizations continue to motivate their employees when bonuses are all but lost? In this economic turmoil, performance results are beyond the control of the employees. There are a few things you can do as an organization to ensure employees continue to be compensated adequately.

COVID-19 Impact on Incentive Compensation

Adjusting Performance Targets

Setting performance targets in a normal situation can be difficult, trying to set targets in a rapidly changing environment can be downright impossible. While some companies may remember how past events like 9/11 and the financial crisis of 2008 affected their business, most are operating under a cloud of uncertainty. The situation will inherently become clearer as weeks and months begin to pass. If you can hold off setting targets, then this will give you more information about how COVID-19 will affect your business.

For those who cannot adjust the performance targets anymore, there are other options to help keep employees motivated. Spot bonuses for those forced to work onsite and paid leave are alternative measures companies can use to keep employees engaged.

Change Bonus Plan Weightings


Annual bonus plans come in many types and sizes. For many, they incorporate factors ranging from sales, business results, health & safety to individual performance. COVID-19 will inevitably affect corporate and business results adversely, reducing the bonus payout for many employees. One solution is to adjust the weighting of bonus plans to put more emphasis on the employee’s individual performance rating. Employees will continue to stay engaged and drive your business to increased profitability.

Introduce Discretionary Awards

One alternative to formulaic performance-based incentives is to introduce a new discretionary award in the short term. Reward employees going above and beyond in this chaotic time. It does not necessarily have to be monetary. Acknowledging hard work goes a long way in keeping your employees motivated and engaged.


Compensation Communication

Whether you decide to readjust your incentive compensation plans or not, communication and transparency are key to ensuring your employees stay involved. These are trying times and keeping your employees up to date on their compensation program will give them one less unknown as we all navigate this global pandemic. A flexible Compensation Management Software will allow you to make quick changes with minimal administrative work. Organizations with a total rewards portals or online compensation statements are already setup to communicate changes to compensation and bonus plans in a fast and effective manner.

If your organization is looking to realign your incentive compensation plans, contact us for a free consultation on how to keep your comp plans driving mutual value for both your business and employees.

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