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08 Dec 2020
by Maggie Williams

Remuneration policies could be set for long-term change, finds REBA’s research

This year has been one of the most disrupted and disastrous in living memory, but many of the shifts in business practice we’ve seen as a result of lockdowns and Covid-19 have magnified existing longer-term trends. More flexible working, greater automation at job and sector level, reskilling workers, climate change and scrutiny of executive pay are just some of the examples.

 

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Inevitably, these shifts affect the performance criteria used for pay, bonus and share options across all levels of a business.

REBA’s fifth Covid-19 snap survey, conducted between 12 and 20 November 2020, found that the performance metrics used to structure bonus targets are being reviewed by 45.9% of businesses, with a further 13.1% saying that it is still too early to make a decision.

Performance metrics that inform share or option incentive targets for 2021 are also under scrutiny, with almost half (47.2%) of respondents saying that some, or all, aspects of their targets are under review next year. For most (31.9%) that applies across the board, with a smaller number focusing either on executives (13.9%) or non-executives (1.4%).

The types of measures under review include moving to purely finance-related metrics, often based on whole company performance. Environmental, Social and Governance (ESG) factors are also a major focus with several participants saying that there will be more emphasis on these in future performance metrics.

Respondents also said they are exploring changes to the performance measures used to inform pay decisions in 2021. More than a third (34.6%) said that their pay metrics are under review for 2021, with less than half of participants (48.8%) confident that there will be no changes to their measures.

With 2021 likely to be financially challenging for many sectors, reducing, cancelling or deferring bonuses for executives and non-executives is also in reward and benefits directors’ thinking. Only just over half of participants said that they would definitely not cancel executive bonuses (47.5%), with 62.7% saying they will not cancel staff bonuses.

REBA’s survey received 132 responses, and is the fifth in a series of snap surveys related to Covid-19 over the course of 2020.  All reports are available here.

The author is Maggie Williams, content director at REBA.