We often say that work isn’t about money. But what will COVID pay cuts do to staff motivation and engagement?

Every single workplace study in the last decade or so has pointed to one immutable fact: when it comes to staff engagement, money doesn’t motivate. Money, if mentioned at all, is one on a long list of things that employees want from their jobs, but oftentimes, they are much more motivated by flexible work options, more super, leave and development opportunities. This being the case, could employers technically pay less, still offer these perks (or even more of them), and still expect the same levels of motivation and engagement? The current COVID-19 pandemic will test that theory, in more ways than one. 

Since the crisis first hit, the professional services sector has been rocked to its core, with everything from law firms cutting staff and partner pay by 20%, to accounting firms cutting both pay and hours by up to 40%. Yet even though pay and conditions may have changed, the amount of discretionary effort that businesses require their team to put in has not – in fact, there’s even been reports that some firms are expecting more of their staff. With such marked change in conditions, what can we expect to happen to staff motivation and engagement levels? And after the crisis abates, how will companies transition employees back to full pay? Or will they? 

Are we all feeling burnt out … or are we actually ok? 

With Australia officially hitting a recession and many of us feeling stressed and burnt out, one might think that engagement levels, putting pay aside, may be at an all-time low. But interestingly, Stella Voules, leading psychologist and organisational development expert, thinks that might not be the case. 

Stella agrees, some people may not be as motivated: 

‘Of course, right now there are certainly some people who may be struggling working from home. These people will either be people for whom the office is their sanctuary, or they are finding it hard to operate at the level they normally perform at as they rely on influencing in person which the virtual world limits.’ 

Yet Stella doesn’t believe that these people are the majority of people. Instead, she thinks that given the current environment, many people may be more motivated: 

‘Quite honestly, I think there are a lot of people out there who are still thinking: I’m glad I’ve got my job. The crisis is far from over, so many people would actually be more motivated and engaged than before.’ 

‘If they feel their employer is looking after them, they’d be grateful and putting in even more discretionary effort.’ 

Leadership and the employee experience still critically important 

In terms of employee benefits, people choose flexibility over money.  But when it comes to job satisfaction, is money important? 

Not as much as you’d think, research says. The number one determinant of employee satisfaction at work is managers. They have the ability to double our happiness at work – or double our misery.

It’s no surprise then that even in times where our pay has been decreased, leadership still plays a critical role in how satisfied, engaged and motivated we feel at work. Stella believes that right now, one particular leadership style will shine through when it comes to job satisfaction for just about everyone: 

‘Unequivocally, now is the time for compassionate leadership. Now is the time to understand the various pressures on your people and to really care and act for them.’ 

If leaders are able to step up and look after their people, Stella believes that there will be a long-term payoff, regardless of what happens with pay. Specifically, she believes: 

‘Right now, the recovery period demands a strategic and balanced response that builds engagement capital. Even though most people are grateful for a job, the employee experience is still an important one. In the coming months, people will remember how they were treated.  ’ 

‘And they’ll use that information to make decisions. It will be a trade-off of sorts, they’ll think, oh, you looked after me, so, maybe, I’ll look after you by sticking around, even if pay rates don’t bounce back immediately.’ 

We might have short-term tolerance for pay changes. But will we have long-term tolerance? 

If pay is seemingly such a minor consideration when it comes to engagement, motivation and job satisfaction, does it matter at all that people have had their pay cut? Will people continue to accept less pay, if they’re able to access other benefits, such as flexibility? 

It’s not that simple, says Stella. She believes that right now, people have developed a short-term tolerance for drastic changes like pay cuts, especially given the circumstances: 

‘Ultimately, people know that everyone is in this together, they want their business to survive.  They recognise that businesses needed to respond in this way.’ 

‘They should be able to make short term lifestyle changes to accommodate a different pay.’ 

Yet Stella thinks this may change, and quickly. With banks beginning to wrap up their mortgage holiday schemes and some government relief packages winding down, people’s tolerance for less may shift. A tension may begin to arise, Stella believes: 

‘Hopefully, if things bounce back quickly employers will do the right thing and pass these gains on to their people. But unfortunately, some employers may not do this, they may try to keep wages low.’ 

If employers do keep wages low for a prolonged period of time, especially once it’s clear the market has returned to normal, employees will start to get quite frustrated, Stella says: 

‘Right now, the market system is more or less working for wages because they are low everywhere. But once things return to normal and if some firms increase their wages before others, employees will likely vote with their feet.’ 

‘Although money may not be a motivator, it is still a factor and it’s unlikely that people will want to work for so much less in a recovered economy.’ 

Less pay = a unique opportunity

The COVID-19 pandemic is a truly once-in-a-lifetime event. As such, it’s created a unique employment situation where paying less may, in fact, increase staff motivation and engagement as everyone is in this together. 

Yet as the crisis wanes, employers do find themselves with a unique opportunity, and things could go either way, Stella says: 

‘Right now, if employers don’t play their cards right, they’re going to get lower performance and lower discretionary effort. Sure, people may not be able to move straight away but as soon as they can, they will.’ 

At the same time, if employers do play their cards right, they could find the opposite is true: 

‘The flipside of this is that if you do look after your people, if you do increase pay as soon as you can, your people will be really loyal and thankful.’ 

‘From a cultural point of view, you may even foster higher levels of motivation and engagement than you’ve ever had before.’ 

When do you think organisations will correct pay cuts? Were the recent changes we’ve seen a much needed correction, or should we expect pay rises when everything’s back to normal? Let us know what you think in the comments below.

If your company has been affected by COVID-19, Career Money Life wants to help. We’re currently offering free access to our platform, including all of our job search resources, for any organisation who may need to transition employees or who may be looking at providing more flexible benefits or career experiences. Get in touch to learn more.

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