Aon surveys highlight how remuneration and workforce strategies are shifting in Australia and globally in response to COVID-19
Key Australian findings:
- 76 per cent of ASX-listed companies to reduce CEO remuneration
- 79 per cent of ASX-listed companies to reduce Chair and Non-Executive Director fees
- 40 per cent of ASX-listed companies will reduce remuneration for general employees
- 73 per cent of <$500m market cap companies observed to have announced more remuneration reductions
- Hospitality, aviation, retail and entertainment industries most affected
Sydney, 14 May 2020 – A new pulse survey from Aon plc (NYSE: AON), a leading global professional services firm providing a broad range of risk, retirement and health solutions, shows how companies in Australia and around the world are accelerating changes to their total remuneration, rewards programs and workforce strategies in response to the deepening humanitarian and economic impacts of the COVID-19 pandemic.
In Australia, 154 companies responded to the survey ‘Navigating the Impact of COVID-19 on Workplace and Rewards Practices’ conducted in March, and Aon Australia conducted a further survey in April of 128 ASX-listed companies that announced their COVID-19 responses through ASX announcements.
Aon conducted the survey, ‘Adjusting Total Rewards Programs and Workforce Strategies in Response to COVID-19’ between 7-10 April 2020 and a total of 1,889 organisations around the world responded. The complete study results are available here.
“This data comes at a pivotal time for our clients. We know companies have a strong desire to help their people as much as possible; yet, many firms also face very difficult economic conditions,” said Alex Cwirko-Godycki, chief strategy officer for the rewards practice at Aon. “The actions cited throughout our study reflect this dichotomy; efforts to manage costs are accelerating, and at the same time, companies are also taking significant steps to support employees working in new or more difficult environments.”
Managing the cost of total rewards programs
In Australia, the April survey of ASX-listed companies found 79 per cent of companies will reduce Chair and Non-Executive Director fees, 76 per cent of companies will reduce CEO remuneration and 40 per cent will reduce remuneration for general employees.
These findings are in slight contrast to Aon Australia’s pulse survey in March, which found most companies taking a ‘wait-and-see’ approach to compensation adjustments as they continue to monitor market signals and the impact of COVID-19.
In the global perspective, between Aon’s March and April global pulse surveys, the prevalence of companies in North America delaying or cancelling salary increases for employees grew from 14 per cent to 32 per cent. This trend mirrors Europe, where the same figure grew from 17 per cent to 35 per cent over the same period.
“In Australia, industries that are more impacted, such as hospitality, aviation, retail, and entertainment have a greater extent of pay cuts across the board, and, by far, smaller companies were more impacted than their larger counterparts.
“Few organisations have so far explicitly stated that there would be immediate changes to their incentive plans for the current year, although material impacts on actual payouts would be anticipated for the year,” said Simon Kennedy, Partner, Rewards Solutions, Aon Australia.
Other common actions to manage total rewards costs include reducing or eliminating spend on contractors and cancelling or postponing employee training programs.
The COVID-19 pandemic already presents companies with a daily barrage of challenging workforce issues to contend with, and Australian and New Zealand firms are reacting by ramping up employee communications efforts, providing additional benefits and putting key workplace safety measures in place.
In contrast to the cost management actions described above, companies are moving swiftly to supplement support programs and leave benefits for employees. For example, in Australia:
- 97 per cent of companies are providing regular updates to employees on key business issues and measures adopted by the company.
- 75 per cent of companies report adjusting or introducing family care benefits, which can include flexible working hours for employees with young children or carers responsibilities.
- A large share of companies have adopted key workforce safety measures, including work-from-home policies, travel restrictions or shift schedules where relevant (and still allowed by governments).
“While the impact and severity of COVID-19 varies across Australia and New Zealand, many companies are still in the early days of responding to COVID-19. In the coming weeks, the workforce challenges faced by clients will continue to expand and evolve, which is why we plan to continue pulsing the market to monitor changing practices,” said Kennedy.
The state of hiring
The impact of COVID-19 on hiring plans is already apparent in Australia and New Zealand, with 48 per cent of firms reporting a more cautious hiring outlook and 23 per cent of firms seeing potential for downsizing their workforces.
It is expected companies will accelerate broader changes to HR and rewards programs as more companies begin thinking about the long-term health of their businesses in addition to the urgent issues of worker safety and business continuity. As such, compensation-related actions, both to manage costs – deferring merit cycles where allowed by law, and to support employees – extra base pay or stipends, are expected to accelerate quickly over the next few weeks.