The cost of everyday essentials has increased. From gas to groceries, the cost of goods has gone up, and employees are looking for wages that keep up with the current inflation rate.
The problem is these expectations could be higher than what employers facing the same high prices can provide. But failing to offer competitive salaries may lead to losing top talent and paying the costs of replacing them. It’s a complex problem.
While daily expenses, daycare, and trips to the pediatrician all cost more for employees, employer-sponsored medical plans and salaries are more expensive for employers to provide.
Over the past decade, the average annual salary increase has ranged from 3 to 5%. Still, according to the U.S. Bureau of Labor Statistics, there was an 6.4% average increase in “all items” between January 2022 – January 2023. In today’s economic climate, if a worker receives a 5% raise but prices are up 6.4%, this raise may feel like a pay cut.
In a competitive job market, employers that don’t meet inflation-adjusted compensation and proactively address concerns about pay can expect a high turnover rate.
The obvious solution for mitigating the cost of inflation is to increase wages, but that may not be possible when employers face equally high prices. So, as an HR Leader, how can you manage salary expectations with inflation?
Here are three ways to address employees’ pay expectations and keep top talent when inflation is high.
Have an Open Conversation – Be transparent with your team and say where the company stands. You can eliminate surprises by showing you understand it’s a difficult time and communicating with workers about what to expect regarding salaries and bonuses.
Another aspect of talking to your team is discussing salaries and pay scales for certain roles. Let’s say you currently have a worker in a salaried position earning $60,000. Instead of offering a percentage-based raise that outpaces inflation, which your organization may not be able to afford, create a plan to gradually raise this employee to $70,000 over an agreed-upon period.
By starting with a 2-3% raise today and a plan to reach the desired amount in six months, the employee feels valued and motivated while buying you time. In this meeting, also discuss measurable performance markers and goals for the employee to demonstrate to earn that full raise down the road.
Leverage Compensation Data – With the growth in remote work, you may have employees scattered across the country. Possibly the globe. To ensure your workers are fairly compensated, it’s important to know what your competitors pay nationally and in local markets so you can keep up with industry expectations.
Employees may perceive they are being paid unfairly, regardless of whether they are or not. But by researching and knowing the numbers, you can address possible disparities and shift employees’ perception of their salary.
Think Outside the Box – Across-the-board pay raises may be unrealistic for your business at this time. Instead, look for alternatives to help relieve employees’ financial burdens and provide the benefits employees want in 2023.
You can support working parents on your team by covering the cost of daycare for one month.
The holidays are always right around the corner. Send out gift cards to help cover the costs of Thanksgiving dinner or Cyber Monday deals.
Getting creative, thinking outside the benefits box, and considering the employee experience at your company can go a long way in boosting morale and generating loyalty.
More ways to do this include:
- Offer remote work – this can help workers save on gas, auto maintenance, and childcare costs and eliminates long commutes that take away from family and personal time.
- Consider your benefits packages – Can you increase the percentage of an employee’s health insurance premiums you currently pay? If it’s already 100%, can you add partial benefits for a spouse or dependent?
- Have you considered offering a student loan repayment program at your organization? Now is a great time to start.
By proactively addressing employees’ pay expectations, leveraging compensation data, and thinking outside the box, you can minimize the impact of turnover from inflation, cut costs without layoffs or wage cuts build trust, and foster loyalty.