Will incentive schemes be reinvented following Covid-19?

21st Century's weekly snap survey series continues to deliver valuable insight into the responses from South African businesses to the Covid-19 crisis. The fifth and sixth surveys in the series addressed the topics of Variable Pay - Short-Term Incentives and Variable Pay - Long-Term Incentives, respectively, and the results pointed to a more cautious business environment.

Variable pay – short-term incentives

This survey explored the treatment of short-term incentive (STI) schemes in terms of whether or not organisations are making any changes to existing STI structures, and if so, what exactly those changes have entailed.

The survey also sought to uncover how accrued incentives are generally being treated and whether discretion is being applied within existing STI schemes. Beyond that, exactly how are these issues being treated at the different occupational levels within organisations?

Survey results indicated that, although respondents were cognisant and wary of the impact of Covid-19 on the economy, many organisations have yet to solidify their decisions around the treatment of their STI schemes.

Uncertainty has led to widespread caution and discretion as far as STI schemes are concerned. Consensus indicated, however, that discretion should be applied as fairly and objectively as possible.

The uncertainty goes beyond STI schemes, though. Approximately one-third of organisations remain undecided on whether they will pass salary increases in 2020. The precarious state of the economy, paired with our current national lockdown circumstances has had an immediate impact on STI schemes as organisations largely focus on survival.

Many organisations are still undecided about their responses to the pandemic from a remuneration perspective, and are awaiting clearer information before making a final decision – be that interim or permanent.

Variable pay – long-term incentives

In terms of the way organisations are responding on the long-term incentive (LTI) side of pay, it seems that the majority is on the fence at this stage, especially given that LTIs are less pressing.

At all levels, several respondents reported that schemes would be left as they are at this stage, with a significant proportion (around 30% at senior levels) continuing their schemes but with changes.

Less than 10% of organisations have put share schemes on hold in terms of top-ups and new awards. 21st century expects to see this practice shift as time goes on, and will continue surveying market responses on LTI schemes. It’s likely that the issue will require serious attention and decision-making in the future, depending on the ultimate impact of the pandemic on our economy.

21st Century will continue to explore the impact of Covid-19 on South African companies and encourages everyone to take part in the ongoing surveys. The effect of Covid-19 on businesses has not been a selective process. Every industry has felt the impact in some way, and only by learning from the current situation can we effectively revive the economy following the crisis.

To view survey results or take part in the latest weekly survey, visit www.21century.co.za.