We posted last week about the impact COVID-19 has and will have on our lives in many different areas. With out focus at Sharpe Valuation on compensation and benefits we are most interested in how practices in that field may change due to this pandemic and last week we covered long term incentives (LTIs) including Restricted Stock Unit (RSU), Performance Stock plans and Employee Stock Options (ESOs). Numerous global companies have already announced short term, temporary changes ranging from pay cuts (for Execs or broader), enforced part-time working, cancelled annual bonuses and pay freezes to protected sales incentive outcomes, enhanced medical leave, temporary allowances and reimbursement on the cost of setting up a home office. Most of these and other short term measures that have been introduced are not sustainable long term but there are some changes to compensation that may occur and be permanent because of COVID-19.
Today we will look at the impact on Gig workers, temporary workers and contractors.
In most countries the trend for a number of years had been away from a ‘job for life’ at one company. Average tenures were decreasing and higher turnover was more acceptable and even to be encouraged as companies sought innovation, fresh ideas and a more flexible work force where the costs could be better controlled. In general the companies who had set up to easily reduce workforce when demand declined were better positioned for this pandemic. However their now unemployed employees were not and are now left with very little opportunity for income.
An increasing % of the population had been moving to ‘self employed’ status over the past decade and many of them had been enjoying the freedoms that came with that. For most it did not mean more money but they could do what they enjoyed or choose the hours they worked, they could be their ‘own boss’. With COVID-19 some ‘gigs’ have more work than ever – online work and delivery drivers are seeing a big demand for their services. However for the vast majority of this transient workforce they are left with very little work and income and very little protections or safety nets.
Countries are now emerging from their ‘lockdowns’ and with that the economy and demand for gig and temporary workers will pick back up. Do some gig workers never return and instead opt for a steady income if they can get it? Will the gig workers who do return have less competition and be able to demand more money which in turn can help them save for the next ‘rainy day’? What about temporary workforces at big corporations? Do these workers all return on the sames T’s & C’s as before? Now they have been burnt do they take that in to consideration going forward? I suspect temporary workers and contractors may want to seek more protections from their next employer where possible eg. longer contracts, longer notice periods, post employment medical cover? If post-pandemic companies further embrace having a flexible workforce but employees are not so keen as before how does that play out? Typically the groups meet somewhere in the middle. So this broad trend toward more flexible workforces will likely continue but with employees demanding more pay and protections in exchange for flexibility on behalf of the companies. For at least the more critical, sought after employee groups they may have some success with these kind of demands in a post COVID-19 world. If they don’t do governments in countries that currently lack a safety net have to step in and fill this gap and who ultimately pays for that?
Look out for Part 3 of this series where we examine the impact of COVID-19 on sales compensation and commissions.