COVID-19 Pulse Survey Insights from Alert Level 3Survey results continue to highlight the impact of the COVID-19 crisis on remuneration in New Zealand, with some promising changes

COVID-19 Pulse Survey

Insights from Alert Level 3

Introduction

As New Zealand moves out of Alert Level 4, the need for People practitioners to respond flexibly to workforce challenges remains a constant.

Following the response to the first EY COVID-19 pulse survey, we have resurveyed our database to provide ongoing insights on how organisations are adapting and responding to COVID-19 related challenges. Our participant group has increased by 20%. We would like to thank all returning participants, and welcome all new joiners. Your contributions help us all gain a clearer picture on how we are managing this crisis.

This report summarises the findings of the 2nd EY COVID-19 pulse survey. Questionnaires were completed from the 16th to the 27th of April. The following topics relating to responses to the COVID-19 crisis were covered:

Approaches to business in lockdown

Utilising the government wage subsidy

Approaches to leave and dependent care during lockdown

Support initiatives for staff

Recruitment activity and hiring freezes

Annual salary reviews

Changes in fixed remuneration

Incentives – both short and long-term. Some participants did not answer every question; available answers were included where appropriate.

Participant profile

The survey received 89 responses from human resource leaders across New Zealand. Of the respondents:

Are NZX listed

Are cooperatives or mutuals

Are government entities, covering local government, central government or government-owned organisations

Are partnerships25%

4%

Introduction and participant profile

COVID 19 Pulse SurveyPage 2 1 May 2020

20% 28%

15%

8%

Are subsidiaries of an overseas organisation

Are companies not listed on the NZX

2020 Ernst & Young, New Zealand. All Rights Reserved

Key findings and trends

Page 3

Survey results continue to highlight the impact of the COVID-19 crisis on remuneration in New Zealand, with some promising changes as lockdown lifts.

More respondents reported operating a business as usual (BAU) approach to work hours and remuneration during the lockdown, with 71% of respondents continuing in a BAU approach, despite the remote working requirements (up 10% from our previous survey).

The business as usual approach continues

54% of organisations are not cancelling incentives for CEOs and Executives. 38% of respondents are still undecided whether to make changes to short-term incentive (STI) plans and 1/3 of the sample have made changes to STI plans.

Only one respondent in our survey has suspended long-term incentives.

Most incentives remain on-foot, although payouts may be unlikely

Pay is relatively stable, remuneration increases look less likely

Wellbeing has been heavily resourced

Only 21% of the sample have reduced pay for employees at any career level.

While 28% of respondents are still undecided about how they will approach their annual remuneration review, the number of organisations either delaying or cancelling their salary reviews has increased to 23% (up from 15% last survey). 27% of respondents are choosing to conduct their annual salary review as per usual.

The majority of respondents are implementing initiatives to support staff holistically, with the acknowledgement that this is a crisis that affects every aspect of our lives.

78% are providing resources for productivity at home (e.g. equipment). There is strong support for mental health, with 64% of respondents providing staff access to wellbeing services, and 60% providing additional counselling or employee support services.

2020 Ernst & Young, New Zealand. All Rights Reserved1 May 2020 COVID 19 Pulse Survey

‘The new normal?’ – Remote working has emerged as the new BAU


71% of organisations have maintained a business as usual (BAU) approach, with no change to their hours of work during this period of remote working. This is a 10% increase in the BAU approach since the first EY COVID-19 pulse survey.

8% are encouraging staff to take annual leave as their main approach, compared to only 3% of organisations doing so previously. 4% have reduced employee working hours. The remaining organisations are using a combined approach of BAU, encouraging annual leave and reducing work hours.

Eleven organisations have reduced their working hours, with most moving to 0.8 FTE. Four organisations have applied the reduction selectively, depending on role, demand and employee safety.

53% of responding organisations have more than 21% of workforce taking annual leave at some stage during lockdown, down from 73% of respondents previously.


71%

8% 4%

17%

61%

3% 1%

35%

Business as usual Encourageemployees to take

annual leave

Reduce workinghours

Combinedapproach

Approach during Alert Level 4

2nd survey results 1st survey results

13%

27%

7%

0%

53%

1-5%

6-10%

11-15%

16-20%

21%+

Percentage of workforce taking annual leave

For the 15 organisations (17% of participants) which are using a combined approach, we have provided a breakdown of their approaches below.

7

3

2 2

1

BAU + encourageemployees to take

annual leave

Encourageemployees to take

annual leave +reduce work hours

BAU + reduce workhours


annual leave +reduce work hours


annual leave

Breakdown of combined approaches (number of organisations)

‘A much needed lifeline’ - the government wage subsidy

COVID 19 Pulse SurveyPage 5

87 organisations answered this question. Of these, 37 organisations (43%) intend to or are utilising the government wage subsidy. This is similar to our previous survey’s results (42%).

50 organisations (57%) indicated they would not be utilising the government wage subsidy. In line with previous results, the majority of these are ‘essential services’ such as financial services, essential retail and FMCG/food production.

1 May 2020

In our last survey, industries with the highest uptake of the subsidy were manufacturing, construction and retail (outside of essential retail). This time, the professional services industry has the highest number of organisations using, or planning to use, the wage subsidy.


1

7

8

9

12

Cooperative or mutual

Partnership

Subsidiary of overseas organisation

NZX Listed

Unlisted company

Government wage subsidy uptake by organisation type (number of organisations)

1

1

2

2

2

3

3

4

4

7

8

Property

Power & Utilities

Media & Entertainment

Manufacturing

Financial Services

Health services

Forestry & Mill Operations

FMCG

Construction

Retail

Professional Services

Government wage subsidy uptake by industry type (number of organisations)

Changes to leave policies during Alert Levels 3 and 4


Special leave during lockdown

Other forms of leave that were temporarily provided during this time include:

• Discretionary leave (6 organisations)

• Pandemic leave (3 organisations)

• Special leave for those unable to work from home (3 organisations)

• Special leave for those in higher risk demographics (1 organisation).

Number of organisations permitting leave deficits during ‘stay in place’Leave due to ‘stay in place’ order

Organisations have acknowledged the potential impact of self-isolation on employees’ ability to work. 48% of all 89 respondents have made changes to their leave policies.

Of these, 13% have made changes to their sick leave policies, 10%have altered their annual leave policies, and 4% have reviewed and made changes to both.

59% of respondents who have made changes to their sick leave policy have permitted a sick leave deficit, while all respondents who have changed their annual leave policy is permitting an annual leave deficit.

1 May 2020

43organisations made temporary changes to their leave policy during lockdown


1

1

3

2

5

15 days' negative leave



Sick leave Annual leave

Policies acknowledging dependent care responsibilities


The COVID-19 crisis has highlighted the challenges of working from home, especially while supporting dependents in our bubble.

Out of 86 respondents, 84% of organisations accept that staff with dependents will be less productive and not adjusting their pay, either as their main stance on the issue or as part of a combined approach. 47% include redistributing or reducing workload in their approach, while 41% include reducing work hours but not adjusting pay in their approach.

33% of respondents are encouraging employees to take annual leave to care for dependents, and 12% are reducing work hours and adjusting pay as part of their combined approach.

Number of organisations acknowledging dependent care through leave policies

8 organisations will consider leave deficit allowances on a case-by-case basis.

Of the 15 respondents which provided details regarding a reduction of working hours for employees with dependents, 2 organisations are offering a reduction to 0.8 FTE. The remaining organisations are considering reductions on a case-by-case or ad-hoc basis.

1 May 2020

72organisations are accepting employees that have dependents will be less productive but are not adjusting pay


1

5

8

3




Less than 5 days' negative leave

Support for staff


The COVID-19 crisis has brought rapid change and uncertainty into many of our lives, both personally and professionally. With the boundaries between ‘work’ and ‘life’ more blurred than ever, organisations are aiming to support staff with a variety of initiatives.

Of the 56 respondents, most (78%) are providing resources to help employees work productively from home. Many are acknowledging the crisis’ impact on employees’ wellbeing, and providing access to wellbeing services (64%) and/or additional counselling (60%).

Other methods of supporting staff that were noted include:

• Hardship payments

• Special training for managers on how to manage people remotely

• Providing shared access to resources that acknowledge the holistic nature of working from home (e.g. for productivity, mental health, and family-related support).

Note: 27 organisations provide multiple initiatives to support staff

45

37 35

1713

1

Provision of productivitysupport (e.g. providing

equipment to work fromhome)

Access to wellbeing services Access to additionalcounselling or employee

support services

Provision of training orupskilling opportunities

Paying additional allowances(e.g. power or broadband

allowance) to supportremote working

Providing ex gratiapayments

Initiatives to support staff by number of organisations


Workforce management - Recruitment


65% of all 89 responding organisations have implemented a hiring freeze, which is a 10% increase from our last survey.

While the majority of organisations (78%) still only intend to implement a hiring freeze for the duration of the lockdown or for 1 – 4 months, organisations intending to have a hiring freeze for 5 – 8 months have increased from 5% to 13% this survey, and those intending to have a hiring freeze for 9 – 12 months have increased from 3% to 9%.

1 May 2020

35% of organisations are continuing their hiring activities unchanged. Of these, the highest portion of the sample are from ‘essential services’ industries, such as Financial Services (21%) and FMCG (18%).


15%

63%

13%

9%

Intended length of hiring freeze (% of respondents)

Only over the Level 4 shut down 1 - 4 months 5 - 8 months 9 - 12 months

1

1

1

2

2

2

3

3

6

7

8

10

12

Property

Transportation

Manufacturing

Health Services

Government & Public Sector

Media & Entertainment

Construction

Forestry & Mill Operations

Power & Utilities

FMCG

Retail

Financial Services

Professional Services

Hiring freeze activity per industry (number of organisations)

Annual salary reviews


Out of 85 respondents, the majority of organisations are either adopting a ‘wait and see’ approach to salary reviews (29%), or planning to conduct annual salary reviews as usual (29%).

For those making changes to their review process, these approaches include:

• 15% of all respondents are delaying their annual salary review

• 13% of all respondents are cancelling their annual salary review

• 9% of all respondents are using a combined approach

• 4% of all respondents are reducing remuneration increase budgets

Compared to our last survey, the number of organisations either delaying or cancelling their salary reviews have increased from 15% to 28%.

We have also provided a breakdown of the combined approaches adopted by 8 organisations.


3

2

1 1 1

Reduce budgets+ other (e.g. ex

gratia payments)

BAU + reducebudgets

Cancel + delayreviews

Delay reviews +reduce budgets

Cancel + delayreviews + reduce

budgets

Breakdown of combined approaches for annual salary reviews (number of organisations)

25 Organisations:

BAU

35 Organisations:

Making changes

25 Organisations:

Undecided

Summary of approaches for annual salary reviews

Fixed remuneration

COVID 19 Pulse SurveyPage 11 2020 Ernst & Young, New Zealand. All Rights Reserved

Of the 89 respondent organisations, 79% have not made any reductions to annual base pay and fixed remuneration.

Of the remaining 21% that have made reductions to annual base pay and fixed remuneration, the adjacent graph presents a summary of the reductions made. Note the graph excludes organisation that did not disclose reductions.

Of the 21% of responding organisations with reductions in pay, the most common approach was a 20% reduction in NED fees, CEO, Executive and all other employees’ fixed pay.

3

1

3

1

7

1

1

8

2

5

10%

15%

20%

30%

NEDs CEO Executives Other employees

Responding organisations with larger reductions in remuneration were typically from organisations in industries most significantly impacted by COVID-19 (e.g., retail, professional services and media and entertainment).

Reduction in fixed pay (number of organisations)

19

39

5

4

21

45

8

5

21

44

8

5

Undecided

Not cancelling

Considering cancelling

Have cancelled

CEO Executive/Senior Management Other employees

Short-term incentive plans

Page 12

STI approach (number of organisations)


82 responding organisations operate a short-term incentive plan for one or more career levels.

The majority of organisations are not cancelling incentives for executives (54%). 44% of organisations are keeping incentives in place for employees below management.

Only 5% of respondents indicated that they have cancelled incentives across all career levels, with 6%considering changes in response to the COVID-19 crisis for employees below management.

Since our earlier survey, it appears more organisations have crystallised their approach to incentives. Now, only 25% remain undecided about executive incentives and approximately 20% yet to make a decision for other career levels.

Most organisations have made no changes to their incentive schemes. As mentioned in the previous survey, we believe the structure of schemes means they will not pay out if budgets are not achieved, thus reducing or negating any requirement to change the structure or cancel the scheme.

12

1

2

4

7

10

13

1

2

3

7

10

14

1

2

3

7

11

Undecided

Re-setting/adjusting performance targets

Considered changes, made none

Reduction of individual STI opportunity

Reduction of STI pool / funding

No changes to STI plan

CEO Executives Other employees

Changes to STI structures

Page 13

Changes to STI structures (number of organisations)


36 responding organisations provided information on whether they were considering making changes to their current STI plans and what changes they were making in response to the COVID-19 crisis. Of those, 38% of organisations are still undecided in their approach and an additional 30% are not considering any changes to STI plans at this stage.

1/3 of organisations have indicated that they have made changes to their STI plan.

Only two organisations considered making changes to their STI plans, but decided to make none.

Of the 33% of organisations who have made changes to their STI, the most common approach was reduction of pool funding (20%). This was followed by reduction of individual STI opportunity (10%) and resetting or adjustments to performance targets (3%).

Long-term incentives

COVID 19 Pulse SurveyPage 14 1 May 2020 2020 Ernst & Young, New Zealand. All Rights Reserved

Approach to long term incentive schemes36 respondents provided data about their organisation’s long-term incentive plan.

Of those, 53% are not considering amendments to their long-term incentive scheme. There were no organisations who are adopting a different approach for the CEO/executives versus other employees.

28% of organisations in the sample are still undecided about their approach to LTIs, while 8% of organisations considered making changes but decided not to. Only one organisation has foregone an individuals’ LTI awards.

One organisation has postponed planned changes to their LTI scheme for general employees and postponed a planned introduction of an annual options plan.

We expect LTI-related activity to continue to evolve as the COVID-19 situation continues. Whilst we haven’t seen organisations make wholesale changes to their LTI schemes yet, our experience in other jurisdictions suggests that potential approaches could include forgoing awards, adjusting performance measures or resetting performance targets.

10

14

17

5

8

9

2

2

2

1

1

1

Otheremployees

Executives

CEO

Forgoing individuals' LTI awards

Considered making changes but decided to make none

Undecided

Not making amendments

Una DiverPartner

People Advisory Services

EY New Zealand Limited

M: +64 27 620 1056 [email protected]

Ross PearceAssociate Partner

People Advisory ServicesEY New Zealand Limited


Mark Van ZonSenior Manager

People Advisory ServicesEY New Zealand Limited


Need help navigating reward through this crisis?

COVID 19 Pulse SurveyPage 151 May 2020

We are here to help. Please reach out to your nominated EY contact if you require assistance responding to the COVID-19 crisis.


mailto:[email protected]

mailto:[email protected]

1 May 2020 COVID 19 Pulse SurveyPage 16

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COVID-19 Pulse Survey Insights from Alert Level 3Survey results continue to highlight the impact of the COVID-19 crisis on remuneration in New Zealand, with some promising changes