Coronavirus Crisis as Catalyst: Change the Way You Look at Your Rewards Structure

I saw these words this morning: "Your brain isn't resistant to change; it is lazy." Can we extend that? Is your corporate rewards program -- the way that you reward your employees for working for you -- resistant to change? Or is that change somehow always on the back burner?

You've looked at the survey data. You've heard the cries for help from employees. But, your rewards program remains right down the middle.

Perhaps you've tried some innovative ways to become an employer of choice. You put the ping pong table and beer keg in the break room. Alas, it didn't reduce turnover. It didn't make your employees happier (except when they hit the beer keg too often). It didn't reduce their real stresses even if it did mask them for a few minutes.

But, the crisis caused by the coronavirus pandemic has forced you to change the entire compact between you and your employees. They've forgotten their office space. The fancy espresso maker you provided them sits idly as they become reaccustomed to the coffee they make quickly in their own home. At the same time, they've likely created their own custom background for their Zoom calls. All of this, they have managed. In fact, if you've kept them employed and had to cut their pay a little bit, most of them have probably managed how to live on a little less.

What they haven't learned though is how to feel secure. They haven't figured out how they are going to deal with a health catastrophe or disability, but maybe the federal government will come to the rescue. Where the federal government has not promised to come to the resuce, even in the most grandiose of campaign speeches is in helping your employees to retire.

You remember retirement. It's what your parents did. Either or both of them worked for a company for a long time. They retired with a pension. Supplemented by Social Security and perhaps some savings, somewhere in their early to mid-60s, they stopped the daily grind and pursued all the hobbies that had been given short shrift while they were working. It was part of the "American Dream."

Not for you? You can't even dream of it?

Look back at what I said a few paragraphs ago. Most of them have probably managed to live on a little less.

Let's do some oversimplified math to figure out how we are going to use this to become an employer of choice again. Consider Taylor, a good employee.

Pre-coronavirus, your basic costs for Taylor included:

• Base pay: 100,000
• Health benefits: 25,000
• Other non-retirement benefits: 5,000
• Retirement benefits: 4,000
• Total: 134,000

With coronavirus, you've had to cut Taylor's pay by $10,000. So, the equation now looks like this:

• Base pay: 90,000
• Health benefits: 25,000
• Other non-retirement benefits: 4,800 (a couple of benefits had a pay-related component)
• Retirement benefits: 3,600
• Total: 123,400

At some point, this crisis will end. And, during the crisis, Taylor may have learned to live on $90,000 instead of $100,000. She would love to get that full $10,000 back, but since she has learned to live on it, that's not what's keeping her up at night. 

During her new social distancing life, Taylor has taken to ever family search website she can find: 23 and Me, Ancestry, MyHeritage, and more. She's learned that going back four generations, the women in her family are long-lived. That's great news for Taylor, right?

Not really. As the she saw the stock market fall and her bank decrease the interest rate on her savings account to 0.01%, Taylor wondered how she can ever afford to retire. After all, she guesses, based on her genealogical research that she will probably live to be about 95. And, after she retires at age 62 (she learned she can start collecting Social Security then), that leaves her with a 33-year retirement. She's going to have to pay for it somehow.

As her employer, you can be the solution to her problem and be an employer of choice. After all, you don't want to lose a great employee like Taylor. And, you've committed that you are willing to spend $134,000 on her total rewards.

Before we do that, let's think about what Taylor is not good at. Like many in her age group and yours and mine and everybody else's, she's not good at financial planning. What you can do to help is to create a nest egg for her. And, don't do it so that some day, she gets a pot of cash from the company, give her lifetime income.

So, let's reconfigure the $134,000.

• Base pay: 95,000 (she learned to live on 90,000)
• Health benfits: 25,000
• Other non-retirement benefits: 4,900
• 401(k): 3,800
• Subtotal: 128,700

You have $5,300 left to spend. That's 5.5% of pay. 

I don't care what you call it, but now is the time to call it something. Take that 5.5% of pay and allocate it to Taylor's lifetime income. Sell it to your employees until you can't sell it anymore. Tell them you are giving them this plan because you want them for their careers. And, tell them you are giving it to them because some day, you want them to be able to gracefully exit their careers and to do so without fear of outliving that little 401(k) nest egg that isn't worth what it was before coronavirus hit.

Once they get that benefit, your best employees won't leave.

Make the best of the coronavirus crisis. Let it be a catalyst for a great change.

The Plight of Retirement And It's No-Mention Status in the Election

We have a Presidential election coming up. We have 34 US Senate seats that need to be filled this year and 435 seats in the House of Representatives. I've looked pretty closely. I've not see a single comment from an individual running for one of those offices that mentions retirement policy or retirement plans. That, while a majority of working Americans either worry daily about the prospects of retirement or would and should have that worry if they came out from under that rock they have hidden under.

There has been far more emphasis on other areas of workers' rewards packages and frankly, that emphasis has not had a major positive effect on the bulk of those American workers. Perhaps you have seen differently, but the three things that have gotten lots of focus ordered only by the way that I choose to type them have been:

• Health care (primarily the Affordable Care Act)
• The need (according to many to reduce executive compensation
• The hourly minimum wage

Let's assume for the moment that if you are reading this that you are over the age of 25 (if you're under 25 and you have an interest in what I write here, I expect that you will have a successful future) and that you have some useful skill set. If that's the case, then there is a good chance that you are employed, employable, and looking for work, not working by choice, or retired. 

If you are working and you fall into those categories, there is a very good chance that you have access to decent health care benefits and, in fact, you probably had them or would have had them had you been similarly situated, before the effective date of the Affordable Care Act. So, while the ACA may have made some changes to your health benefits, it's not likely that those differences were life-changing for you (yes, I understand that uncapping the lifetime maximum and allowing your kids up to age 26 on your policy could have had that big a difference for you).

Similarly, most of us are not executives and certainly not of the classification whose compensation draws the significant ire of others. As individuals, we might have opinions on levels of executive compensation or we might not, but most of us know that even reducing our CEO's pay by 75% would not change our compensation one iota. We are compensated roughly on our value in the marketplace. Our value does not change merely because our CEO takes a pay cut.

Finally, there is the hourly minimum wage. I could be wrong, but my observation is that there just aren't a whole lot of people earning less than $15 an hour (unless they are currently in school) who read this blog. So, for you, the hourly minimum wage probably doesn't make much of a personal difference (I understand that you may have very strong opinions on it, but those are from the standpoint of what's right and what's wrong).

Where is poor little retirement? Social Security gets debated. But, we all know that you just can't retire on Social Security. 

I'm not going to spout statistics here because I don't have them at my fingertips. But, my observation is that a generation ago, far more employees than not were covered by meaningful employer-provided defined benefit (DB) plans. And, among those who were not, likely the majority of the rest were in often generous money purchase or profit sharing plans. 401(k) plans were in their infancy. As I've written many times here, 401(k) plans were never intended to be a primary means of retirement savings. 

That was the way of the mid 70s through mid 80s. 

Today, as we know, more employees than not, have a 401(k) plan as their only employer-sponsored retirement plan. Many of them are not generous. Many are poorly invested. In a perfect world, the employees in many of those plans will find it difficult to retire with anywhere near the standards of living they are used to. 

It gets worse, of course. Many of us will have or have had work interruptions or, at the very least, periods where we need to reduce or even cease our 401(k) contributions.  

We have a crisis. 

There, I said it. I believe it. 

In fact, it affects and will affect more Americans more profoundly than most of the issues being hotly debated. It certainly affects us more than does knowledge about Hillary Clinton's emails or Donald Trump's tax returns.

Yet, the candidates remain silent.

So very sad.