Join James Redfern, Chief Financial Officer and Becky Wood, Sr. Applied Analytics Adviser, as they dive into wages pre, during, and post pandemic – and what this means for economic recovery.

1. THE IMPACT OF THE CURRENT
ECONOMY ON COMPENSATION
MANAGEMENT
Wednesday, June 17th, 2020

2. TODAY’S SPEAKERS
JAMES REDFERN
Chief Financial Officer
BECKY WOOD
Applied Analytics

3. 3
TODAY'S AGENDA
• Recessions and wages
• Using salary data as your guiding compass
• Working with the CFO
• Tying it together: How to use data to inform compensation decisions
• Q&A

4. RECESSIONS
AND WAGES
How our economy got here…

5. 5
2009-2020: 10 YEARS OF GROWTH
• Longest economic expansion on record (128 months)
• Average GDP growth per year since end of Great
Recession through 2019 = 2.3%
• Average annual growth rate and workers earnings
relatively modest compared to earlier long expansions

6. 6
THE ECONOMY NOW: THREE CONCURRENT CRISES
Government intervention
• Massive federal reserve support
Coronavirus
• Womenhave had a higher risk of suffering
greater penalties in earnings
• Womenof color face wider gaps in
opportunity
Pay inequality
• Overall increasing inequality
• Gender, racial, opportunity gaps

7. 7
CORONAVIRUS IMPACT
End of
economic
growth in USA
due to shut
down of the
economy
Through Feb
2020,payroll
employment
had risen every
month for 113
months
Private employment
rose for 120 months
Totaljob
losses through
May = 19.6
million
13.3%
unemployment
rate (May
2020 BLS)
42 million Americans
received
unemployment
insurance benefits
(Brookings Institute)
45.2% are
essential
workers
(United Way)
Highest
concentration
of essential
workers
Washington DC
(74.93%)
Lowest
concentration
of essential
workers
Arizona (39.3%)

8. 8
TODAY
• It’s official: We’re in a recession (NPR)
• Recession began in February 2020
• Record-breaking stimulus packages
• Largest unemployment rates since the Great Depression
• How long will it last?
• 2.5 million jobs added as unemployment dips to 13.3% in May 2020
• The stock market is rising
• Working from home
• 82% of US workers prefer to work from home (Global WorkplaceAnalytics)
• Increase in productivity
• Economic fallout – but where?

9. 9
WHAT DOES THIS MEAN FOR COMP?
• DNWR: Why wages won't fall along with prices and
demand
• Employers will reduce their workforce but
maintain pay to keep employees satisfied
and productive
• Unusually, there will be temporary paycuts
and furloughs during COVID
• Guidelines for cost cutting measures:
• Don't cut pay if you can avoid it - or you are
confident it is temporary and/or in line with
market
• Use annual bonus for cost control
• Do freeze pay if warranted
• Do suspend benefits outside of healthcare
• Do consider reduced hours
• Don't cut healthcare benefits
• Don't cut perks that boost morale or
productivity

10. USING SALARY DATA
AS YOUR GUIDING
COMPASS

11. 11
WAGE DATA OVERVIEW
What's happening NOW?
• Real time market data to reflect what's
happening in the economy
PayScale Company and Crowd Sourced data:
• 65M total salary profiles
• 8,000 clients
• 10M website contributors
• 1,900 employer participants
PayScale Methodology:
• Collect > Validate > Augment & Analyze
> Match & Deliver
• Proprietary algorithms to assure
consistency and accuracy with every data
point used in our compensation models and
reports

12. 12
IMPACT ON INDUSTRIES
Wage growth by industry slowed to
0.5% this year compared to 1.6% in
2019
• –0.7% industry wage growth drop
between Feb 2020 and March 2020
Highest Feb 2020 to March 2020 wage
decreases were in:
• Retail & Customer Service at –11.6%
• Accommodation, Food Services at –8.4%
• Every other industry took a hit or stayed
flat

13. 13
IMPACT ON OCCUPATIONS
Wage growth by occupation slowed
to 0.6% this year compared to 1.1% in
2019
• –0.7% occupation wage growth
drop between Feb 2020 and March
2020
Highest Feb 2020 to March 2020
wage decreases were in:
• Legal jobs at –7.3%
• Food service and restaurant jobs at
–6.6%
• Retail jobs at –3.4%

14. 14
IMPACT BY CITY
Wage growth across all metros dropped
to -0.1%, from 3.1% last year
Highest YoY wage increases:
• Nashville-Davidson--Murfreesboro--
Franklin, TN: 1.8%
• Milwaukee, WI: 1.6%
• San Francisco: 1.5%
Highest YoY wage decreases:
• Houston, TX: –3.4%
• Detroit, MI: –1.8%
• Kansas City, KS: –1.5%

15. 15
COMP PHILOSOPHY CHECK
New business environment
New goals and objectives
New ways of working
Same laws and regulations
Same HR objectives
What new data can we get,
do we need to adjust our
employee compensation
philosophy to the new...
everything?

16. Working With the CFO:
Data makes
the CFO Purr

17. 17
HOW TO PARTNER WITH YOUR CFO
Data Scenarios

18. 18
1. DATA
• Compensation impacts talent
retention, performance, and
the bottom line
• Surface key information:
• Increase budgets
• Performance ratings vs.
ranges & market
• Employee by pay
grouping
• Alternatives / Tradeoffs
• Maximize Free Cash Flow in
3-5 Years (seriously, that is
all a CFO cares about)

19. 19
2. SCENARIOSHOW TO GET YOUR CFO TO SAY "YES" THE RIGHT ANSWER
• Show the data:
• Transparent datasets
• Structure modeling
• YoY analytics
• Attrition (voluntary and involuntary)
• Range penetration / benchmarking
• Compensable reports
WHAT OTHER CFOs ARE TALKING ABOUT....
…..AND WHY IT MATTERS TO HR & COMP
• CFO and CHRO should be in lockstep in business decisions:
• People are the most important asset; risks of overpaying and underpaying
• People want to understand the rationale
• Align talent with business strategy. How?
• Configurable reporting and modeling
• Dynamic merit matrix
• Cost variances by geo
WHY SHOWING THE CFO DATA IS VALUABLE
• Understandmarket data and market prices
• Be in control of your approach to spend
• Provide alternatives; understand tradeoffs
• Maximize Free Cash Flow in 3-5 Years (seriously, that is all a CFO cares about)

20. WHAT THIS ALL
MEANS AND HOW
TO USE THE DATA
Let’s put it all together

21. 21
BE NIMBLE AND THOUGHTFUL
NIMBLE
• Remote workers
• Essential workers
• Gig workers
THOUGHTFUL
• Laws
• Internally and externally
equitable
• Skills
• Equity

22. 22
PLAN - DATA

23. 23
ANALYZE - DATA

24. 24
UTILIZE - DATA

25. 25
UTILIZE – DATA (CONT)

26. 26
ANTICIPATE - DATA

27. Q & A
THE IMPACT OF THE CURRENT ECONOMY ON
COMPENSATION MANAGEMENT

28. 28
ADDITIONAL Q&A
Regarding essential workers (we are in the restaurant industry), what trends are you seeing for their pay (permanent
wage rates, not hazard temporary pay)? Also Becky mentioned to think about what else we can impact other than
their pay/benefits, but I didn't hear any examples - can the team provide any examples?
Becky at PayScale: Most essential workers were brought back or continued employment at the same rate of pay as
before. Less than 6% had any hazard pay as of April. We'll see what happens for May and onward.
The goal is to think outside of hourly pay, hours, and benefits. To consider spot bonuses, other perquisites,
discounts, etc. I've even heard of a "loyalty" list that an employer posted on their premises to allow customers to
recognize (hopefully with a big tip) their valued employees who have had to sacrifice their own income while the
business was closed and are even now, not back to where they would like to be. Always remember that recognition
can go almost as far as a bonus. When I was in comp at a not-for-profit, the letter of recognition from the president
was always prominently displayed by the award winners at their desks. In a follow-up survey, they valued the
recognition (an award ceremony in front of peers by each department) three times (3x) more than the cash award
itself.
Do you see a national average for pay rates given remote work becoming a reality?
Becky at PayScale: We see that now in many industries. Many more clients moving to a national structure.
However, at the non-exempt job level, geographic differentials still seem to be prevalent. We are keeping an eye on
this trend.

29. 29
ADDITIONAL Q&A
How much should experience factor into pay, versus individual performance and role importance to the company's
success?
Becky at PayScale: The answer to this is the classic, "it depends." It is a factor of the industry you are in, the type of
job duties and responsibilities associated with a position, if there is a union involved, etc. Most organizations are a
blend of "all of the above."
I wonder the factors that played into the wage growth trends. Am I right to interpret that
wage rates didn't decrease but the growth or expansion of them slowed. It was confusing between the data showing
growth trends or actual paid trends
Becky at PayScale: Sorry about that confusion. I tried to work in too many different summary statements into the
slides. The information provided in the slides in the comp section pertain to wage growth. The wage growth
measures the percent change in median total cash compensation from month to month and a 12-month comparison
using all profile types and those with job offer profiles only (for the job offer trends). Actual wages have stayed the
same or shown slight growth. As James indicated, this has remained the case even through
previous recessions. The wage growth percent has fallen or slowed across most industries, occupations and some
cities – deeply in March, starting to trend up slightly in April, but still lower compared to 12 months ago.

30. 30
ADDITIONAL Q&A
Regarding the "add-ons" in pay. Have you seen any data showing the costs of working from home (i.e., higher
utility bills) versus cost of commuting, parking, etc.?
Brian at PayScale: We haven't seen specific data regarding "add-ons" yet. What we have seen anecdotally at
PayScale is that employees are experiencing some moderate increases in utilities, whether it be and uptick in
electricity and water consumption or needing to increase their home internet bandwidth. Generally speaking the
reduction in commuting costs (outlined below with very broad assumptions) more than offsets these, however it is
important to recognize that every employee will have a unique financial circumstances. Evaluate where your
employee population is at and potential hardships they may be encountering. Include in that evaluation what the cost
saving the business has had by not having employees working in its office/work locations and see what potential
savings the business may have that can be passed along to employees. It is important to note and communicate that
business still have rent and utility expenses even though the buildings may not be occupied so not all or sometime
none of the savings can be passed on to employees.
The median commute in the US is 43 miles, multiply that by the IRS mileage rate of $0.575 cents per mile and you
the medium cost for a commute per day is $24.73 (not including parking). Then if you factor in 20 working days per
month that is $494.50 in saving from wear and tear on a vehicle alone. Granted some people take public transit
which is about $7.00 round trip, so $140 per month.

31. 31
ADDITIONAL Q&A
Are any companies considering providing a 'payback' to employees as they shift to virtual environments and
therefore limit the cost/spend on real estate?
Brian at PayScale: We haven't seen any data on a 'payback' yet, however companies ought to be thinking about how
they can adjust their total rewards packages to meet the demands of a virtual working environment. Gone are the
days of unlimited gourmet coffee in the office, company lunches every Monday, happy hours on Fridays, or that big
summer family picnic. Think through why you were offering the perks and benefits you were in the first place. Was it
simply to be competitive with what other businesses in your industry were offering or were they perks that
differentiated your package and enhanced your culture? How could you deliver upon that same differentiation in a
now virtual work environment? The answer will be different for every business and we are still thinking through this at
PayScale for our own employees. Reach out to peers who do HR for 100% remote companies and learn some of the
things they have been doing for years to enhance their cultures.