Will ‘Hero Pay’ Stay?

It made sense at many firms first deemed essential. But now they—and many others—have a thorny issue on their hands.

It’s been at the back of many corporate leaders’ minds for a while. What happens to the heroes when all the regular people go back to work? Or, more precisely, what happens to their extra pay?

As states enacted shelter-in-place rules to combat the spread of the coronavirus, organizations deemed “essential” offered extra pay to workers as a way to recognize their importance and to encourage them to stay on jobs filled with risks. Now, as more states and countries are lifting restrictions, firms ranging from healthcare operators to delivery outlets face a critical pay decision as they seek to resume more normal operations.

So far, the answers vary not only by industry but sometimes firms within the same sector. Amazon, for instance, said this week that it would end the hourly wage increase and double overtime pay it had been giving warehouse and deliver workers at the end of May. Amazon started paying an extra $2 per hour and doubling overtime for those workers in March to compensate for increased demand. But the company said today that demand and shipping times are returning to normal and would not extend its "hero pay" further.  

In the healthcare sector, “hero pay” was meant to recognize the extraordinary effort of long hours, quarantining away from home, and dealing with the personal, physical, and mental toll exacted from the virus. Reopening more healthcare outlets, experts say, won’t necessarily make those issues go away. “Therefore, the pay should likely continue until these issues subside,” says Marc Hallee, a senior client partner at Korn Ferry and leader of the firm’s Healthcare Total Rewards practice.

Indeed, according to the polling data, some organizations plan to keep pay premiums in place for as long as employees are required to wear masks, provide retention bonuses, and increase paid time off as additional compensation rewards.

But the debate becomes thornier at other firms, particularly those that faced survival issues even before COVID-19. That includes many retail companies, where many workers were kept on the job to serve the delivery and e-commerce sector. Now, with outlets trying to resume operations, says Craig Rowley, a senior client partner in Korn Ferry’s Global Consumer Markets practice, extending pay premiums or making them permanent is simply not sustainable. “Companies are making little or no profit given all the additional expenses,” says Rowley, pointing to the hiring of additional staff, the institution of social distancing requirements, and payment for COVID testing. “As business gets back to normal, they have to get their expenses, including pay, back to normal.”

Such shifts, of course, won’t go over well with many workers—now accustomed to the pay or knowing their colleagues were getting it. A new Korn Ferry poll shows that more than four in 10 retailers increased hourly pay for store associates, with some others instituting future bonuses. Now, the survey found, six in 10 plan to end pay premiums at the end of May.

In the category of hero pay overall, Tom McMullen, a senior client partner at Korn Ferry and leader of the firm’s Total Rewards practice, says one key dynamic will likely influence the future of such pay premiums: the 33 million people recently unemployed in the United States. “High local unemployment may be reducing the need to offer these pay supplements,” says McMullen.