Tesla’s Reduced Pay Period Comes to an End


Organizations have taken a series of steps to mitigate the adverse impact of the COVID-19 pandemic on their business. While many have announced layoffs, furloughs, and other measures related to jobs, some have taken different cost-optimization measures.

Tesla had announced a pay cut for all its salaried employees in mid-April. The range of pay reduction was between 10–30 % based on the role of the person. This was a step in the direction of trying to keep the business operational during this phase.

In addition to the pay cut, Tesla took other steps like delaying merit increases, promotions, and bonuses in this quarter. The HR team has now announcedOpens a new window that the pay reduction period ended on June 29. This step is likely being taken as the business shows signs of revival.

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However, the key questions that arise are about the impact of such pay decisions on employees’ adverse financial healthOpens a new window during the pandemic. In addition, maintaining equal payOpens a new window has also been an essential area of concern.

When Pay Cuts Are Non-Negotiable

Pay reductions for a short duration might have been a better alternative for some organizations than downsizing. But in addition to that, making provisions for employee benefits could be a more proactive approach for loss of pay. This can take the form of any or all of the below steps.

  1. Provision for health benefits – Health benefits and insurance coverage are essential parts of overall employee compensation. By providing them, organizations show commitment to the well-being of those who work for them. Employees can also feel secure about their health as well as any future financial costs related to it.
  2. Accessibility to financial support or advance pay – Making financial support or advance payOpens a new window options available to employees can reduce stress due to a drop in income. In some households, members have lost their jobs, and they might be dependent on a single income. Advance pay can address such situations.
  3. Find platforms that can provide help and information – Some platforms offer helpful information, even for employees who are being laid off, such as affordable health plans and temporary job opportunities. For instance, some time ago, Benefitfocus introducedOpens a new window a platform to help displaced employees find affordable health benefits. Introducing employees to such platforms can keep their worries at bay.
  4. Benefits for specific employee segments – Several people are struggling to work from home due to responsibilities at home as well. They could be caring for old parents or small children. When pay increases are not possible, providing additional benefitsOpens a new window to them that assist them during this phase is a good idea.

Supporting employees with other things such as home office tools and technology, as well as recognitionOpens a new window for their efforts and flexibility, can be other aspects to ensure that employees remain engaged even when there are pay cuts. Deferred bonuses are also a way to let your employees know that they will receive their bonuses, but at a later date.

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Tesla also announced its performance managementOpens a new window approach through the same email. Employees must understand how their pay is linked to performance. But comprehending the performance review process itself is a challenge. All organizations need to revisit their performance management systemsOpens a new window to understand their validity during the COVID-19 pandemic.

Due to the sudden imposition of lockdowns and businesses getting affected, business goals have changed. Employees are also expected to immediately start working differently. With such a transition, old performance review methods might not work. This is an excellent opportunity to revamp them and make them more relevant for the present and sustainable for the future.

Given the current situation and the uncertainty that surrounds organizations in the coming months, taking steps that can ensure talent retention and engagement is going to be the way forward. The competitive advantage for all firms will lie in making this time a productive as well as transformational one when it comes to traditional people processes such as pay, benefits, performance, and KPIsOpens a new window .