Whether your life sciences firm is on the front lines of responding to COVID-19 or not, delivering life-saving discoveries remains as important as ever. For HR and rewards leaders, this means moving swiftly to keep workers as safe and productive as possible.
Compared to much of Asia, countries like Italy, and states like New York, most of North America is still in the relatively early days of combating the COVID-19 pandemic. However, for life sciences companies in this part of the world, the workforce and compensation impacts of COVID-19 are already acute. In just the last two weeks, HR leaders have had to quickly take action on a range of issues, from enacting new policies to keep workers safe to fortifying benefits programs to reassessing equity grants that have greatly diminished value.
In mid-March, we connected by video conference with HR and compensation leaders at more than 30 leading life sciences firms with operations in the United States (U.S.) to learn more about how they are adjusting to daily events on-the-fly. This article, while not a comprehensive assessment of market practices, summarizes key themes from our conversation and provides insight into where other companies in the sector will likely head next. We also recognize the COVID-19 pandemic continues to unfold, so we remind readers that our conversation represents a specific point in time in what is an ever-changing environment.
For a more comprehensive look at emerging workforce and rewards practices in response to the COVID-19 pandemic, readers can download the results of our recent pulse survey of more than 2,000 organizations in North America and Europe, conducted between March 17-20, by clicking here.
Enacting Safety Measures for On-Site Employees
Many of our life sciences clients have a small portion of their workforce still working onsite, such as their R&D and manufacturing functions. HR leaders are working to ensure the safety of these employees by following guidance from the Center for Disease Control and other local government agencies.
“We’re coming up with creative ways to keep our workers that need to report onsite safe,” remarked one client, who has about 20% of their workforce (mostly in manufacturing and critical programs) reporting onsite. Our life sciences clients reported enacting the following safety measures:
- Developing shift crews with alternating schedules;
- Developing contingency plans for staggered staffing at manufacturing sites;
- Moving as quickly as possible to a "skeleton crew";
- Reinforcing safe social distancing measures for staff that are onsite;
- Taking additional measures to clean and disinfect shared working spaces;
- Converting some shared spaces into single occupancy rooms;
- Creating new protocols for signing in and out of work; and
- Taking employees’ temperatures before they enter buildings.
Most of the clients we spoke with say they are considering additional compensation for employees continuing to report into work at a physical location but haven’t worked out the details. “We have clients asking about what is typical for premium pay for onsite working during this crisis,” says Meaghan Piscitelli, associate partner in the Rewards Solutions practice at Aon. “These are unprecedented times, so we don’t have a lot of data to draw from, but providing some type of recognition in the short term can help boost morale. Special bonuses or premium pay can be worked out as companies see how long their employees will be working under the current circumstances.”
Making Remote Work Easier
Along with adjusting rewards for workers still reporting to onsite locations, our life sciences clients are also evaluating what they need to do for the vast majority of their workforce that is now working remotely.
“We implemented a loaner program where employees can request hardware equipment — extra monitors and headsets — to be sent to their homes to make work from home easier,” remarked one biotech HR executive. Another biotech firm client said they are paying a one-time $500 stipend to employees for personal IT equipment for their home office while another client said they surveyed their employees as they began working remotely about their IT requirements and are drop shipping equipment to employees’ homes.
When it comes to childcare, many of our life sciences clients had onsite daycare facilities for their employees that have been temporarily shut down and are assessing whether they will reimburse employees or suspend daycare tuition for the time that the onsite daycare is closed. At the same time, some firms are providing stipends for backup care and partnering with providers like Care.com. Other firms are more hesitant to facilitate these programs, instead offering as much flexibility in employees’ workdays as possible. “We looked at providing backup childcare or reimbursing employees to find their own, but we’ve ultimately landed on not putting in place these programs that potentially go against social distancing guidelines,” said one client.
Other approaches our clients mentioned include increasing emergency childcare benefits for employees and extending the family leave component under the Family and Medical Leave Act.
Adjusting Time Off and Sick Leave Benefits
Many of our life sciences clients are considering or have recently added benefits aimed at addressing acute needs during the current pandemic. A few biopharmaceutical clients have entered a special time off code into their HRIS system to track employees’ time off should they or their family members contract COVID-19. The code is generic for privacy reasons and the firm is only using the information to monitor time off. “Employees that get sick with the coronavirus can take off as much time as they need to recover, and it won’t affect their pay, benefits or their normal vacation and sick leave,” says one particular client.
That approach is favored by other firms as well. According to one client: “If employees get sick or need to take time off to care for loved ones, we’re not treating it as leave so it will not eat into sick, vacation or family leave time.”
Another firm is providing employees with an additional two weeks of sick leave on top of their standard two weeks, which can be applied to employees who contract COVID-19, those who are asymptomatic but self-quarantine, or those who are caring for a family member who falls ill. The new Families First Coronavirus Response Act that goes into effect April 1, 2020, requires some employers to provide paid family and sick leave for a variety of COVID-19 related reasons, including inability to work due to the need to self-quarantine or if an employee cannot work because of school age childcare. There are qualifying criteria such as number of days, amount of pay, which employers and employees are covered, etc. Click here for the Department of Labor’s summary of the law.
The actions our clients are taking are in line with the broader market. More than three-quarters of North American respondents (78%) in our recent pulse survey said they have already augmented family care benefits, including sick leave and childcare allowances. Thirty-four percent of respondents said they have specifically increased sick leave allotment.
Assessing Equity Strategy in a Turbulent Market
The stock market has lost significant value since the COVID-19 pandemic reached the U.S. — erasing nearly all the gains made in the past four years. As a result, many of our clients are asking about how to address board of director grants typically awarded in May as well as new-hire grants going forward.
Development stage life sciences companies face the biggest questions. An overwhelming percentage of these firms set awards based on number of units rather than value, meaning awards granted in the current environment stand to be much smaller in value, or the number of shares will need to be increased. Increasing shares could send the wrong message to employees who have already received awards for 2019 performance and have an adverse effect on shareholder dilution. It also may not be wise to adjust the number of shares directors and new hires receive until it is clear how markets will respond over the course of April. Given this, many of our clients remain in a “wait-and-see” mode while actively evaluating potential paths. For example, with a slowdown in hiring and onboarding new employees for most — though certainly not all — companies, some of the pools originally allocated for new hires, could be repurposed for retention or to address underwater equity.
When it comes to ongoing awards and future new-hire awards, either method that a company uses to calculate equity awards — a value-based approach or a number of shares approach — will run into hurdles in the current environment. When companies grant equity to deliver a certain value, firms experiencing a declining stock price will need to grant more shares to deliver the same value, thus increasing burn rates and equity overhang. Given current volatility, it is important to determine how many additional shares you expect you’ll need to cover 2020 awards and what the allowable limits are for your share plan. For those firms granting the same number of shares regardless of price, the opposite will be true: if you grant the same number of less valuable shares the value of the equity award will drop, which may create significant internal equity concerns.
Companies have several approaches they can take when addressing equity awards that have greatly diminished in value, including doing nothing and waiting to see how the market responds in the coming months. That appears to be the favored approach at this moment in the pandemic crisis. Just over three-quarters of all North American respondents to our pulse survey say they don’t currently expect the stock market to impact equity grants made this year.
“A lot of value is being lost right now in equity, but it’s still too early to say if this will be a long-term problem that lasts a year or longer or if it the market will experience a rebound before the end of 2020,” says Tanaz Moazami, associate partner in the Rewards Solutions practice at Aon practice. “Given this level of uncertainty, it might make sense to keep share amounts the same for now regardless of the stock price drop.” However, if the market doesn’t rebound as businesses head into Q3, then it might be worth addressing through additional, secondary grants to make up for some of the lost value, Moazami says.
Commercial life sciences companies are also weighing whether to make changes to their sales incentive plans. Our clients tell us they haven’t made any decisions to amend their sales compensation plans yet, including quota setting and incentive design, but we expect more concrete actions to be taken in the coming weeks and months when commercial organizations have better insight into their sales forecasts.
Additional Resources from Aon
For more information about how businesses are responding to the current pandemic, including stakeholder communication, health and benefits impacts and business continuity planning, please see Aon’s COVID-19 Response Site here.
To download complimentary results of our pulse survey on Navigating the Impact of COVID-19 on Workplace and Rewards Practices in North America and Europe, please click here.
For more information about how total rewards are being impacted by COVID-19 across all industries, see our recent article Considerations for Your Total Rewards Strategy in Response to COVID-19.
Finally, if you have any questions about the topics discussed in this article, please reach out to one of the authors or write to rewards-solutions@aon.com.
COVID-19 Disclaimer: This document has been provided as an informational resource for Aon clients and business partners. It is intended to provide general guidance on potential exposures, and is not intended to provide medical advice or address medical concerns or specific risk circumstances. Due to the dynamic nature of infectious diseases, Aon cannot be held liable for the guidance provided. We strongly encourage visitors to seek additional safety, medical and epidemiologic information from credible sources such as the Centers for Disease Control and Prevention and World Health Organization. As regards insurance coverage questions, whether coverage applies or a policy will respond to any risk or circumstance is subject to the specific terms and conditions of the insurance policies and contracts at issue and underwriter determinations.
General Disclaimer: The information contained in this article and the statements expressed herein are of a general nature and not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate ni the future. No one should act on such information without the appropriate professional advice after a thorough examination of the particular situation.
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