With Inflation at 8%, How Should Your Business Deal with Raises?
Nearly three years into a post-pandemic world where inflation is soaring above eight percent, the most pressing issues for potential employees are (unsurprisingly) competitive wages and cost of living adjustments—and rightfully so. Amid the historically high cost of transportation, housing, groceries, and fuel, new social challenges like The Great Resignation add to employers’ growing list of challenges.
Workers want their current employers to adjust compensation, or they may be forced to look elsewhere for higher wages. In most major cities across the United States, the cost of living has increased by nearly three percent on housing and transportation alone. This does not include the cost of inflation itself, which affects the cost of goods and services independent of living costs. (Inflation in Atlanta led the nation at nearly nine percent.)
What can your company do to offset some of the burden associated with immediate pay raises, improve employee morale, and retain your best talents? Read on to find out.
#1. Be Transparent.
First and foremost, be transparent about your salary plans. Share openly if you are planning to increase salaries gradually or communicate why you can’t make a full cost of living adjustment at this time. Myriad studies show that transparency is the #1 indicator of employee happiness, and employees who trust their employer are more engaged and loyal than their more dubious teammates.
Transparency benefits the employer/employee relationship, but it is also simply the right thing to do. In a world where housing is hard to come by, grocery bills are stressful, and gassing up to commute to work makes you cringe, your company can leverage transparency as an added benefit of employment, creating a more positive work environment for current and future employees.
Find satisfaction in being the good guy, and your employees will reward you with trust and loyalty. It’s truly a win-win.
#2. Be Optimistic.
Optimism might be your company’s greatest antidote to inflation-driven panic. One recent study showed a whopping 90% of Gen Zers are nervous about their financial future. This study showed four major areas of concern: overall finances, family-related expenses, keeping up with monthly bills, and fear of unknown expenses. That’s a lot of financial fear. Help your employees remain optimistic by providing reassuring updates and intentional communication when possible.
Remaining optimistic about your company’s forecast is the best way to ensure employee retention. According to consulting group McKinsey, “When the path ahead is uncertain, people turn to leaders to help them gain clarity and a grounded hope for a better future.” Acting with calm optimism gives your organization a sense of purpose, creating an environment that fosters an attitude of perseverance and unity.
Some studies suggest that times of uncertainty are very beneficial for companies because potential leaders emerge in times of crisis. Avoid drawing your leadership circle too tight by purposefully sharing decision-making efforts with relevant staff and key stakeholders. In doing this, you will foster an environment that supports longevity and attracts highly-skilled talent.
#3. Be Strategic.
Another way to support your employees well during this historical time is to understand the difference between raises, cost of living adjustments, and inflation hikes.
One study found that most US companies plan to increase salaries by 3.9%, which does not fully compensate for inflation but is higher than last year's average raise, which was approximately 2.8%.
It is also important to note that inflation and salary increases are not the same. Inflation represents changes in the market based on the cost of goods and services. However, salary raises are based on supply and demand for labor. Keep in mind, wages are considered “sticky”—meaning the rate sticks and does not go down. It is difficult to reduce wages if the market deteriorates, so many companies are opting to be more strategic about inflation compensation by investing in employee programs like flexible bonuses, stock options, and benefit plans. These options create a strong work culture and do not drive up fixed pay costs.
Knowing the difference between consumer inflation and labor market growth will help you balance short and long-term financial requirements while creating a workplace that conveys respect, consideration, and resourcefulness as core values.
#4. Be Supported.
Use a trusted recruiting firm to acquire the highest performing talent in the job pool. We know that times are changing, and it can be difficult to keep up with hiring best practices. As hiring experts in the tech space, eHire understands leading hiring processes and can make recommendations, like a proper salary range for a position. We stay current on salary trends, competitive options, and industry best practices, so we can guide you in building the optimal hiring process.
At eHire, our mission is to do more than just connect your business with the right talent—we equip your team with the latest information on hiring to make your process stand out. Reach out to us anytime to learn more about our tech hiring solutions.