Most employers are staying the course

May 27, 2020

Findings of Mercer’s US Compensation Planning Survey – May edition. Questions and findings change with each survey edition so be sure to check out the full series of articles.

Though the headlines would have you believe that employers are all reducing their workforce and cutting pay, according to Mercer’s May edition of the 2020 US Compensation Planning Pulse Survey, that doesn’t exactly seem to be the case.

In the nick of time

As we discovered in the April version, the majority of employers surveyed planned to or had already given annual base salary increases to their employee populations. We confirmed in this survey that, in fact, timing of the increases played a large part in that decision. Ninety-four percent of those surveyed in May indicated that they deliver annual increases on a focal date (e.g., Jan 1, March 1) each year. Of those, 48% indicated their focal date was in March or April, with another 24% delivering increases even earlier in the year. As we suspected, by the time COVID-19 hit, many had already delivered and/or communicated increases.

Similarly, with incentive/bonus payouts being the majority, 79% indicated they had paid out or would pay out bonuses as planned, with no reduction. Again, this was likely due to the timing as many companies pay out bonuses around the same time as annual increases. Additionally, the bonus paid in 2020 is typically rewarding performance for 2019, which would not have been directly impacted by COVID-19.

Only 24% of organizations have started developing their compensation increase plans for 2021, but we anticipate this number will slowly climb as workplaces open up and focus shifts to returning and reinventing work.

What are employers reducing?

This month we asked what cost-cutting actions employers may be taking. As of now, reductions in pay don’t seem to be a widespread cost-cutting measure, at least amongst the 622 participating organizations in May’s survey. Seventy-five percent indicate that they have no intentions to reduce base salary. Of the small percentage of organizations that have reduced pay, most indicate they have done so at the C-suite and “Other Executive” level indicating that it’s a temporary change. Below the leadership level, of those indicating they are making pay reductions, 70% stated they did so for salaried workers and 38% for hourly workers without a corresponding reduction in hours.

Almost three quarters of respondents indicated that the size of their workforce has stayed the same or even grown (4%). Of the 29% that indicated they have reduced the size of their workforce, almost all indicate that the size of the reduction has been less than 20%.

Moving forward

As COVID-19 continues to impact organizations in lasting and varied ways, and as companies move toward returning to work, we do anticipate continued changes. With planning for 2021 right around the corner, be sure you’re prepared. Participate in the next US Compensation Planning Pulse survey to learn about the approach organizations are taking with long-term incentives and sales incentives, along with other important topics.

US Compensation Planning Survey Pulse – May Edition infographic image