The Return of Hero Pay

It came, then it went, and now it could be back again. No, not the coronavirus. Hero pay.

Many companies that had initially extended hero pay—increasing hourly wages or doubling overtime—either ended it at the beginning of June or planned to end it as operations returned to normal. But “normal,” of course, isn’t shaping up the way the world expected, with daily infections in the United States topping 50,000 on several occasions recently. Meanwhile, delivery giants, pharmacies, and other “essential” firms are still in need of hundreds of thousands of workers.

The answer, experts say, may well be a return to higher wages or bonuses, the kind of which firms needed at the height of COVID-19, recognizing the importance of frontline and essential workers and encouraging them to stay on at jobs filled with risk.

Indeed, Amazon—after earlier ending hero pay provisions—said it would pay a total of $500 million in one-time bonuses to the frontline and delivery workers who were with the company through last month.

The possible resumption comes at a time when employee frustrations about wages and safety concerns are becoming more visible and prevalent, says Tom McMullen, a senior client partner at Korn Ferry and a leader of the firm’s Total Rewards practice. “It’s become a top concern for many workers,” he says. “It’s pressing organizations to rethink their principles around wages for essential workers as we continue into the pandemic.”

As of late May—the most recent period measured—Korn Ferry data shows that 16% of organizations globally had enacted hero pay and another 8% were considering offering it, with retail, healthcare, and consumer goods companies leading the way. Those figures are down from late April (17% enacted and 12% considering, respectively) but still elevated considering most programs were expected to be over by the beginning of June.

For his part, Don Lowman, global leader of Korn Ferry’s Rewards and Benefits practice, says the return of hero pay will be situational and largely dependent on businesses that need to retain or hire people to handle increased demand resulting from the pandemic. “Ultimately, it boils down to affordability and supply and demand for labor,” says Lowman. “If people are willing to come back to work without hero pay, then companies won’t provide it, especially in a period of continued economic uncertainty.”

Despite the recent uptick in employment over the last few weeks, people may indeed be happy just to have a job. Even though 3.1 million jobs were added in May and 4.8 million more were added in June, the unemployment rate still stands at 11.1%, higher than at any point since the Great Depression. Moreover, analysts suggest the recent uptick may vanish as quickly as it appeared if a second wave of the virus forces states to close their economies again.

All of this creates a very dynamic situation, McMullen says, with many organizations having to balance taking care of their employees with maintaining financial viability. “High unemployment coupled with the financial damage caused by the pandemic could dampen the sustainability of hero pay,” he says.