10 Return-to-Work Compensation Strategies for Remote and Furloughed Workers

The COVID-19 pandemic has upended businesses globally for nearly every worker, including remote, furloughed, and essential employeesOpens a new window . Nearly 21 millionOpens a new window people are unemployed in the United States, and the workforce has dropped to 137 million, according to reports in the Insurance Journal. Overnight, healthcare workers, delivery, and grocery staff (battling the front-line) found themselves to be telecommuting. Whereas, the corporate and hourly workers moved to working remotely and being furloughed. While, the pandemic has immobilized employees and workers, several small businesses and startups are struggling to keep workers on their payroll.

In this post, we explore how employers could address compensability challenges arising from telecommuting employees, workers from businesses labeled “essential,” and furloughed/laid-off employees.

According to DeloitteOpens a new window , the pandemic will impact employees and workers compensation. However, HR leaders must drive efforts to prioritize payroll strategiesOpens a new window in the recovery phase. So, here are some return to work compensation strategies for remote and furloughed workers:

1. Use an Automated Payroll System to Comply With Furloughed Workers Pay Policies

A lot of small businesses are reclassifying workers and adjusting employee wages right now to get by. Factor in PPP loan requirements and there is a lot more to consider and account for when dealing with compensation than usual.

All these constantly moving parts point to the importance of having a highly flexible and automated payroll system. The last thing you want to spend time on right now is redoing all the math and double-checking your compliance for every furloughed worker. A good payroll system will allow you to change a workers status, and the rest is taken care of automatically.

2. Understand the Tax-Withholding Obligation for Remote Workers

Employers need to understand the tax-withholding obligation for their workers. As a rule, state income tax withholding is required in the state in which the employee performs services. Because of COVID-19, many employees are now working from home – or a relatives home – which could change the employers withholding liability.

Some states, and even cities, have issued guidance considering COVID-19, and the guidance is not always consistent. For example, the guidance from Pennsylvania suggests that employers still need to withhold taxes, even if the employee is working remotely in another state. However, the city of Philadelphia has stated that city tax withholding is no longer required for employees working outside of the city. Employers who are not registered in an employees home location may need to register for payroll taxes in new states where they are not already registered and withhold taxes accordingly. In addition to state income taxes, employers may also be required to withhold local income taxes as applicable.

Learn More: How HR Can Rethink Payroll Planning for Gig Workers: Q&A With Alight SolutionsOpens a new window

3. Prioritize Flexibility for the Remote Employee

Compensation is challenging in normal times. Despite a changing environment, prioritize the needs of the employee. Through a pandemic and double-digit unemployment, compensation is still top of mind for employees. Compensation done right is motivating. Done wrong, compensation drives wedges and turnover. Compensation audits help you stay ahead of these potential problems, keep your team focused, and realize these benefits:

1. Equal pay for equal work is the law. Its also a huge bummer for employees to find out someone makes more than they do for the same work.

2. Stay up to speed on market and geographic shifts in compensation.

3. Have the knowledge, data, and confidence to address employee questions about compensation in a way that develops employees trust and confidence in their organization.

“HR can keep employees working by leading remote work principles and flexibility. Finding ways for employees to work, support customers, and continue business, even when everything is changing, means the business can keep workers on payrolls. #InItTogether.

4. Offer the Benefit of Daily Pay to Your Employees

Employees expect employers to step up as leaders and meet their needs for personal security, financial security, and work culture. 1 in 6 peopleOpens a new window looking for work now are seeking jobs that offer a daily pay benefit. This is significant. It is an indicator that regardless of what scenario works, they need faster access to their pay. HR leaders have multiple compensation options, from pay cuts to furloughs; part time rehiring to outsourcing; layoffs to shift differentials and even bonus pay. The most important solution everyone can provide is to give their employee financial control and make daily pay benefits essential.

 

 

 

Learn More: How Transparency in Payroll SoftwareOpens a new window Enables Hiring for Small Businesses: Q&A With ZenefitsOpens a new window

5. Identify Both Over and Underpayments to Avoid the Risk of Lawsuits

Mike BoroOpens a new window , workforce of the future partner, PwCOpens a new window

One reason many businesses conduct compensation audits is to confirm the accuracy of employee pay, identifying both over and underpayments. Being proactive and identifying underpayments prior to employee complaints minimizes the risk of lawsuits and government sanctions. Identifying overpayments will allow an employer to determine if, and how to correct systems prospectively as well as considering the need for retroactive adjustments. Understanding the accuracy of payments can prevent associated liabilities, for example related to retirement plan contributions.

6. Mitigate Attrition Through Lower Pay Practices Among Workers

The overall benefit of conducting compensation audits is to ensure that compensation is fair across the business, specifically in similar job codes. Historically, this has been helpful in mitigating attrition through lower pay practices, but in todays climate, it helps ensure that some of the differences in pay are equitable based on the responsibilities of each employee.

One of the biggest opportunities is to ensure that HR teams are aware of the opportunities within the Coronavirus Aid, Relief, and Economic Security (CARES) Act for small businesses. The CARES Act offers credits and other programs that can provide funding to help employers continue to keep workers on the payroll.

7. Provide Access to On-Demand Pay for Employees

Jeanniey WaldenOpens a new window , chief innovation and marketing officer, DailyPayOpens a new window

HR leaders are in a tough spot right now. On one hand, they need to support their employees needs, from home office tools, to medical care and more. On the other hand, they need to remain fiscally responsible, so there is a future for the company.

Compensation audits create a balance between employee and company needs. The pandemic has financially challenged us all, especially small businesses where many workers have had to look for other income. Recent DailyPay research shows that employees with access to on-demand pay stay 50% longer and more engaged and are more productive at work.

Learn More: Freelance Employment and Self Employment: Benefits, Best Practices, and Key DifferencesOpens a new window

8. Renegotiate Your Contracts With Suppliers to Avoid Layoffs

Brian WestfallOpens a new window , principal analyst, Software AdviceOpens a new window

Routine compensation audits are essential to preventing payroll fraud, which is more than twice as likely to occur in businesses with fewer than 100 employees than those with 100 or more, and result in losses upwards of $60,000Opens a new window .

In these unprecedented times, there really are no bad ideas that arent worth considering when it comes to avoiding layoffs and keeping workers on payroll. Freezes on hiring, bonuses, and unnecessary expenses like travel are obvious levers you can pull. Cutting hours and benefits or offering extra days of unpaid leave can help too. It also doesnt hurt to try and renegotiate your contracts with suppliers.

9. Offer Remote Working Support, Periodic Incentives, and Supplemental Plans

Wilson SilvaOpens a new window , senior vice president of outsourcing, Alight SolutionsOpens a new window

For employers that have telecommuting employees: Concerns exist around working conditions, such as having access to a laptop and monitor and proper desk and chair. If telecommuting will become more permanent, employers can consider providing these type of workplace necessities on top of normal remote working support, like printers and other office supplies. However, some employers may feel that the trade-off between commuting offsets costs, so employees who elect to telecommute or work from home should be responsible for covering the costs. Employers should make a distinction between those that work from home voluntarily, and those required to work from home, as this goes a long way when it comes to keeping employees engaged and able to perform their work at an optimum level.

For employees labelled essential: Providing additional compensation through an allowance or periodic incentive payments helps manage the compensation equity issues among those required to go into work, compared to employees who can work from home.

For furloughed workers: Employers can consider a Supplemental Unemployment Plan that helps provide benefits beyond what state unemployment would normally cover. The plans can be flexible in terms of how much of normal compensation to include in the supplemental plan. These plans are typically beneficial to employers because they are more affordable than traditional severance plans.

Danny SperosOpens a new window , director of people at ZenefitsOpens a new window

Employees are telecommuting from parents homes, vacation homes, and more, and that may have payroll tax implications, so monitor movement. For the short term, allow employees to keep their same compensation for consistency and simplicity.

Workers in essential businesses have the option to stay home to protect their and their familys health. On top of providing a safe and clean work environment, paying a temporary premium rate can help your business staff up.

Additional unemployment benefits are helping many furloughed and laid off employees make it through this time. Paying for the Consolidated Omnibus Budget Reconciliation Act (COBRA) or extending benefits is a huge help to people making difficult spending decisions.

Learn More: Why Equal Pay Is Still Important in the COVID-19 EraOpens a new window

10. Consider the Cost of Living to Restructure Salaries for Remote Workers

Mike BoroOpens a new window , workforce of the future partner, PwCOpens a new window

The “cost of living” differentiator related to salaries for remote-workers is a huge component of remote-work hiring strategies. While some companies pay a globally universal salary, most companies increase an employees salary to reflect a higher cost of living. With 43% of CFOsOpens a new window expecting to make remote work permanent, employers need to determine whether to reduce an employees salary, if the employee is no longer working in a location with a higher cost-of-living. And if the salaries are being reduced, the key question is, how is that communicated to employees so that they do not feel their pay is being unjustly reduced?

Closing Thoughts

Notably, if you adopt compensation strategies for the remote, furloughed, and essential workers as an on-going discipline, you will have already addressed most of the compensability challenges identified for these workers. You will be able to shift the focus on business goals and improve employee experience, which is primordial for engagement and productivity.

Found these compensation strategies for remote and furloughed workers useful? Follow us on TwitterOpens a new window , FacebookOpens a new window and LinkedInOpens a new window and share the best practices you follow to address the compensability challenges arising for these employees.