73 percent of 1,150 HR professionals surveyed indicated that inflation was a concern at their organization. Recognizing the impact of inflation on their employees, HR professionals plan to adjust their compensation strategies to ensure their team feels appreciated and supported during this period of economic uncertainty.
As of June 2022, inflation accelerated to 9.1%, the highest it has been since November of 1981. U.S. companies found employers are budgeting an overall average salary increase of 3.4% for 2022, which is significantly less than current inflation rates, yet 21% higher than the 2021 average.
Salary increases to compete with inflation are great, for companies who can afford it. By factoring inflation into employee compensation, the employer is showing their team that they are a valued member of the company and that they care for their well being and stability. Offering salary increases, especially during a period of rising inflation, helps to motivate employees at work and increases retention.
Unfortunately, raising salaries to match inflation is easier said than done. Even if you can afford a generous 10% boost across the board right now, there is no going back. That is your new baseline for increases next year and this may come back to bite you next year. How are you supposed to show your appreciation for your employees without draining your budget?
Luckily, there are other things you can do! If implementing an equitable pay increase across the company is not an option amidst inflation, consider showing your team appreciation in other ways. One method you may consider is implementing pay bonuses. Bonuses are a great way to increase morale and keep your employees motivated. If this isn’t feasible for your company, consider other benefits such as child care, gym memberships, or even employee engagement opportunities such as free lunches.
The bottom line when it comes to supporting your employees during inflation is that there is no one correct strategy. The size of the company, the available budget, and several other factors need to be taken into account when faced with the inflation vs. compensation question. Ultimately, what is most important is that efforts are made, however possible, to support your employees through inflation.
If you would like to learn more about managing pay strategy amidst periods of inflation and recession be sure to watch our July Webinar to hear what Michael Pires (Decusoft), Alan Miegel (BetterComp), and Dan Moynihan (Korn Ferry) have to say on the topic.