Working with inflation: How adjusting benefits can fill the gap
It’s no secret that recent inflation has impacted almost every aspect of our daily lives — and the job market is no exception. The increased cost of living combined with the impact of a global pandemic, recessionary concerns, political unrest and the war in Ukraine has caused a ripple effect across the globe. The cost of basic goods and services has increased significantly, ultimately leading to demand, and need, for increased salaries. Many workers are even considering taking on new jobs that offer better compensation and benefits.
And while governments are working hard to decrease inflation, most economists believe it will remain high in the near future, and may begin to decrease to 7.5 to 8 percent by the end of the year, barring a significant external shock. This leaves employers in a hard spot, trying to keep pace with the increasing demands of employees to maintain retention rates.
What does the rising cost of, well, everything mean for you and your business’ compensation strategy? Read on to learn how you can better plan for your current and future compensation needs.
In the U.S., inflation has increased by 9.1 percent, as of July 2022, according to the U.S. Bureau of Labor Statistics. With everything becoming gradually more expensive, people are looking for ways to save money in every way possible — and employers are no exception.
According to the Society for Human Resource Management, it costs companies six to nine months of an employee’s salary to replace them. Retaining current employees and attracting top-tier talent is one of the many ways businesses are looking to cut back on costs. But with high turnover rates among workers, organizations are searching for ways to combat inflation and keep employees satisfied.
Going beyond employee salaries
A July 2022 release from the Bureau of Labor Statistics reports that wages and salary costs for private industry workers increased 5.7% over the past 12 months nationally; this is up from the standard 3% pay increase of past years. In addition, the August 2022 National Consumer Price Index for the last 12 months increased by 8.3%. These above-average numbers are hard for any company to shoulder, and not every organization can manage these increases. So what can an organization do to help employees combat inflation and maintain retention?
One of the most obvious answers to the question of what to do about inflation is to increase employee compensation. This can take many forms, such as recurrent pay raises or additional bonuses. And with a growing number of workers considering taking other jobs that offer higher wages or better benefits, employers need to act fast to compete.
Keep in mind, employees also want financial support beyond a pay increase. Expectations for better benefits — a flexible work schedule, a healthier work/life balance, and more — can play a large part in whether candidates deem a job worth taking.
Assess your benefits
Now more than ever, employees are prioritizing their financial wellness. The pandemic has impacted how people view not only their saving and spending habits but also the financial benefits offered by their employers. It’s reported that 65% of employees expect their employer to provide more financial support than they did before the pandemic.
While benefits are an important part of employee retention and satisfaction, they are also an area employers can modify to remain competitive in the job market. Reassessing your benefits packages can aid in offsetting inflation and ease employees’ concerns. For instance, increasing the amount of money that employers pay towards employee health insurance premiums can improve worker retention and show that businesses are invested in their employees. Employees can also gain peace of mind knowing their health and wellness are protected.
Revamping 401(k) packages is another way for employers to tackle inflation. Boosting the percentage of matched contributions can help employees feel greater stability in their job and encourage workers to remain at the company.
A survey from Betterment found that 56% of employees would consider leaving their current job for another that offered a better 401(k) matching program.
If you are unsure where your organization stands, bringing in an outside expert can help. A compensation advisor, like Compensation Works, can help compare your benefits to the current market, identify gaps in your packages, and increase employee retention. Advisors can also aid in implementation, ensuring your employees are aware and taking advantage of your company’s benefits.
Offer flex time or remote work options
Burnout is a leading concern of today’s workforce — with approximately half of the employees surveyed reporting symptoms of physical and emotional exhaustion. Many organizations are opting to creatively reduce stressors by reconsidering their in-office requirements or giving company-wide mental health breaks in addition to existing PTO.
Some businesses have considered switching to remote work to cut back on costs of commuting, child care, or the occasional morning coffee trip. Others have tried a 4-day work week or increasing the allotted amount of paid time off to improve worker productivity and maintain employee retention. And with the ever-changing job market, other potential solutions to addressing inflation may pop up.
There are positive signs the economy will right itself in the near future. For now, employers should be communicative and transparent with employees about their salaries and benefits while working to create a strategy that not only supports their business — and their workforce.
Creating a compensation plan that rides the waves of the current job market can help employers attract fresh talent—and maintain current employees. Contact Compensation Works today to see how we can help.