Smart companies will increase workers’ compensation due to runaway inflation
Now is the time for managers to step in and help their employees
We are in a precarious situation. The rapid rise in inflation, to a historic high of 41 years, worries workers. The United States is still suffering the lingering effects of the virus epidemic, worried about the potentially ruinous confluence of inflation, recession, layoffs, the possibility of stagflation – not seen since the 1970s – of a bear market in securities, war and rising costs.
Rather than waiting for employees to ask for a raise, empathetic leaders should proactively attend to the financial well-being of their staff and discuss options to help them navigate this new economic environment.
There has been some movement in this effort. According to SHRM, the major human resources organization, in March the average weekly salary increased by 5.6% compared to the same time last year.
Smart managers should raise salaries. Although we face a difficult economy, employment remains strong. If companies fail to meet the needs of their employees, the best and brightest will be recruited or leave of their own volition to pursue opportunities that offer a substantial salary increase.
Business leaders cannot settle for the new reality. the US Bureau of Labor Statistics reported that the consumer price index, which measures the cost of goods, outpaced wage gains as it rose 8.5% year-over-year in March. This was the largest annual increase since 1981. As inflation rises, the situation will only get worse for people.
Businesses have options. In addition to raises, companies may offer bonuses, stock options, and other forms of compensation. In a January 2022 Gartner survey of 71 companies, approximately 37% of organizations said they plan to factor inflation into their compensation budgets. Unfortunately, only 13% intended to increase compensation for all employees due to rising inflation. Since then, inflation has continued to rise rapidly.
From February 25 to March 7, “An employer survey by compensation data and analytics firm salary.com shows that most U.S. organizations (73%) are targeting a payroll budget increase of 4% or more this year, and a plurality of organizations (43%) are increasing their merit increase budgets by 5% or more.” While it’s good to see action being taken, single-digit increases may not be enough.
Remote work may help ease some of the pain
By now, it should be obvious to business leaders that inflation is taking a heavy toll on the salaries of their employees. For many people, they feel like they are making less money as the dollar is devalued and loses purchasing power. As the cost of food, clothing, cars, rent, and other essentials rises, a person’s salary does not keep up.
Team leaders should be encouraged by management to sit down with their staff and discuss how they can raise salaries to offset rapidly rising inflation. In addition to improved payments, the company could offer remote work options.
If someone is allowed to work remotely, they won’t have to travel, which will reduce their consumption of expensive gas. If she takes public transport, which is expensive, there will also be a reprieve on these expenses.
When you are forced to return to the office, you usually buy breakfast, lunch, and sometimes dinner or drinks after work. In big cities, it could easily cost twenty to over thirty dollars a day, or over a thousand dollars a year. It is also necessary to buy a new company wardrobe after being at home for two years. By working from home, you can buy in bulk and save a lot of money compared to eating out or ordering in when you’re based in an office.
The most recent household survey from the US Census Bureau revealed that more than a third of Americans indicated that they had difficulty paying their expenses. The number of people reporting experiencing budget difficulties ranks near the worst time of the pandemic in early 2020.
Seeing this problem, companies need to get creative with their employee benefit programs. Progressive companies could help by reducing the costs associated with health care benefits, offering student loan assistance, offering subsidies for child and elder care, cashing in on stock market declines by offering higher contributions to retirement plans that could grow tax-deferred and potentially lead to substantial gains years later. Management should also consider offering policies specifically tailored to the individual needs of workers.
Attract and retain talent
Even the coldest executive needs to recognize that even though the job market is still relatively warm and finding and retaining workers is difficult, they need to act. If they don’t offer higher salaries to job seekers, they will go elsewhere. When current employees aren’t offered pay raises, they become disenchanted, disengaged, and will eventually join the big quit movement. They will resign to take up positions in companies that offer better overall compensation that will help them through these difficult times.