Ken Mulkearn | 03 Jun 2020

What will the pandemic's aftermath bring for reward?

A person squeezing hand sanitiser into their palm

Pay review outcomes are a key indicator of economic health or ill-health, and just as the pandemic has affected some social groups more than others, this data is also presenting as complex. On the one hand the median pay award is holding up at 2.5% (see page 5 of Pay Climate). This is largely because of the number of higher-end awards in those sectors that have become crucial to life during the pandemic: finance, retail, the public sector, social care and the utilities, as well as parts of manufacturing. The rising statutory wage floor and firms’ responses to it are one factor, and improved pay deals as a reward for coping with difficult – even hazardous – working conditions are another.

But on the other hand, the proportion of pay freezes has risen sharply as other sectors, or parts of sectors, have been negatively affected by the economic lockdown. This complexity is underlined by the results of the second of our surveys of employers’ reward responses to the pandemic (see page 13 of Pay Climate). While most of the latest sample have increased pay, some have frozen it – though a number of these have done so for higher-paid managers rather than frontline staff – and a large proportion have yet to reach a decision on their pay reviews for 2020. Some of these could yet turn into freezes, depending on the wider economic and epidemiological context.

One bright spark in the gloom is the current low level of redundancies, according to our survey and official figures alike. But this could change, especially since what began as a supply shock has turned into a demand shock. Given the announcements on job losses at some companies, the main focus is now on the Government’s coronavirus job retention scheme (CJRS). The CJRS will continue to guarantee workers 80% of their wages until 31 October. But between now and then, employers’ contributions will rise, albeit on a phased basis, covering employer NI and pension contributions from August plus a further 10% of wages in September, rising to 20% in the final month of the scheme. Importantly, after 1 August the scheme will become more flexible, by allowing part-time working – at 100% pay – alongside continued (reduced) Government support for wages.

The changes indicate that the Government is engaged in a balancing act between economic and safety concerns. The provisions for employers to bear an increasing share of the costs are mainly designed as a perverse incentive for firms to start bringing employees off furlough and back into productive work. And while the increased flexibility will be welcomed by many employers, it may not be enough for those sectors that have been hardest hit. The failure to recognise in practice the disparity of the virus’ effects has been one reason for the popularity of ideas around linking the CJRS to job guarantees.

In a context of generalised economic weakness and the associated threat to jobs, this has received an echo in plans for a new job creation scheme. Otherwise the CJRS could simply become a ‘waiting room for redundancy’ for many workers. A further issue, as the lockdown measures are eased, is that sick pay provisions will attain greater prominence, especially once track and trace measures are finally in operation.

What about the aftermath? Given the negative impact of the virus on the economy, there is bound to be a tension between the drive to restore profits and the need to recruit, retain and motivate staff, particularly those whose work was important to social functioning during the pandemic. But there are many signs that the employment field has been altered in fundamental ways. The poor pay and conditions of many groups, from care staff to those on zero-hours contracts, have been exposed and in many cases, found wanting. This is especially so when we consider that many of these occupational groups have been those that have suffered the most fatalities – care staff, cleaners, chefs, drivers, process plant operatives, sales assistants, security guards and warehouse workers.

Trade unions have been involved in discussions over the CJRS and other measures, and union membership is on the rise. The reality of homeworking has shifted the meaning of the word ‘flexibility’ from one that almost always relates to employers’ requirements to one than can at least sometimes refer to employees’ needs. Women have borne the brunt of childcare during a period when many have been either furloughed or forced to work from home while schools have been closed. The new version of flexibility is likely to be high up their personal agendas and could feed into a further push for equal pay. Most of all, though, the insertion of danger into many jobs that were lower-risk has placed employers in the unusual position of having to act in ways that ensure employees’ goodwill. This is likely to affect employment and reward for a long time to come.

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