While details on the tariffs established by the U.S. continue to change, business leaders have been scenario-planning for actions they might take under a variety of outcomes, including those that impact pay and jobs.
Immediately before the April 2, 2025, detailed announcement of broad-based tariffs, WTW fielded a pulse survey on adapting to 2025 U.S. policy shifts. At that time, 59% of companies expected direct impact from tariffs that could compromise their profitability.
Through several subsequent surveys, including one published by Chief Executive magazine that included 329 U.S. CEOs and business owners on April 8–10, participants expressed increasing concerns: 76% of those surveyed said that tariffs would negatively or very negatively impact their businesses this year.
Based on WTW research and discussions with boards and corporate executives, effective leaders are planning and ensuring their teams remain focused. Here are five actions effective leaders are taking related to pay and jobs:
Plan for the range of possibilities. Effective leaders are using the 90-day pause from many of the broader tariffs to conduct scenario planning and learn more about what will happen with tariff structures and inclusions and exclusions before they act. They understand that pay and job decisions can have both short- and long-term implications, and they only make decisions and plans after completing a clear assessment.
Clarify what can’t wait. Effective leaders prioritize pay and staffing actions based on their company’s situation rather than following the latest polling trends. They have learned that broadscale geopolitical events call for “best fit” not general “best practice.” For example, a company that has the need and resources to shift manufacturing onshore will prioritize different actions than a company that can continue existing operations at reduced scale if an economic downturn occurs.
WTW’s survey reports that among companies expecting a significant direct impact on profitability from tariffs, 42% are considering adjusting annual salary increase budgets downward, compared to 18% of the entire sample. Half of the highly impacted companies have already made changes to short- and long-term executive incentive plans and goals compared to 21% of the entire sample, and 58% are considering additional changes compared to 25% of the entire sample.
For everything else, pause until there is more clarity. Effective leaders are realistic about their ability to set a definite plan in the early days of tariffs. They also are pragmatic about pay and other labor costs as they consider what should move ahead in 2025 and what likely must wait until next year. For example, almost half of survey participants noted that with their 2025 salary increase process complete, any likely impact of future changes will be on 2026 budgets. 75% of participants reported staying the course on hybrid and remote work policies.
During this pause, many leaders report they are scenario-planning across people-related programs: modeling potential volatility of defined benefit pension plans in order to be ready for fluctuating markets and interest rates; forecasting potential increases in healthcare costs due to higher unit costs (affected by tariffs and supply chain disruptions); and evaluating lower attrition or delayed retirements on total labor costs.
Focus on key talent. Effective leaders understand that salary budgets only go so far. They know that in times of economic volatility, inflation, recession concerns and cost constraints, they need to make tough decisions and focus pay and staffing investments on employees with the most critical skills and in the most critical roles.
Effective leaders review pay, benefits, wellbeing and careers (including skilling and mobility strategies) holistically and convey programs that help engage and retain key talent while managing costs. For example, WTW’s Global Benefits Attitudes Survey shows employees deeply value employee benefits such as healthcare and retirement. It also reports that almost half of hybrid and remote workers value flexibility and choice wherever possible, especially during periods when pay budgets become tighter.
In 2024, this WTW survey reported employees’ willingness to take a pay cut (of 8%, on average) to work flexibly. In a crisis, effective leaders carefully weigh options beyond cost-cutting measures to avoid unforeseen challenges that could make things worse.
Listen to employees and communicate regularly. Effective leaders know that employees and productivity are affected by disruption, so they seek to understand employee concerns through formal listening. They increase their listening and communication during times of disruption.
More than half of WTW pulse survey respondents indicated their workforces are most concerned about their base-pay increases. This may reflect employee concerns about inflation, a potential recession and other economic impacts following newly implemented tariffs.
Effective leaders recognize that employees may have concerns about job security, declines in savings and retirement plan values, mental health challenges and their impact on physical health and absenteeism. These leaders support employees through communication to promote their benefits and wellbeing programs. They provide their employees with practical decision support to keep them from taking knee-jerk reactions, for example, with 401(k) plans. They also watch for signs of stress, monitor employee wellbeing during the crisis and take action as needed.
Strategic and thoughtful leadership is critical to managing tariffs’ impact on pay and jobs. Effective leaders prepare for multiple scenarios, prioritize essential actions and remain flexible. By focusing on retaining key talent and addressing employee concerns through transparent and open communication, they help ensure the stability and resilience of their organizations during periods of uncertainty.
A version of this article originally appeared on Forbes on April 17, 2025.