What are employer’s options to ease employee cost-of-living fears?
It’s everywhere — the gas pump, in the grocery store, in the housing market and even in the workplace. Inflation is impacting every aspect of our economy, and experts say it’s not likely to slow anytime soon.
In March, inflation rose to its highest rate since 1981 — 8.5 percent year over year — negating many of the 1 percent to 3 percent raises employers typically offered their employees in the past year. Middle-class Americans, accustomed to pinching pennies during the pandemic, are now stitching their wallets shut because, quite simply, they aren’t taking home enough money to get by.
According to Forbes, 57 percent of Americans claim their latest pay increases can’t compete with surging inflation. The dollar just isn’t worth what it was at this time last year, so while people may be making more, it’s adding up to less.
The financial forecast isn’t all doom and gloom though. Innovative businesses are taking this troubling time to reevaluate and address employee needs, providing work-life options like remote opportunities and paid benefits, as well as refocusing on delivering exceptional service to clients and consumers alike in an effort to capitalize on the current market without further feeding the beast that is inflation.
Many employers trending growth and profit are planning to increase their payroll budget up to 5 percent to combat inflation, but this welcome correction may come too little, too late, and will likely remain behind current trends.
In HR consulting firm Mercer’s recent survey of more than 300 U.S. employers, 45 percent of employers said they don’t factor inflation into salaries, and less than 25 percent said they were making changes to their salary budgets because of it. Yet 42 percent said employees have been asking employers to take financial action. Considering 77 percent of employers report that unsatisfactory pay or an offer of increased wages at another organization were among the top reasons for resignations, it seems counterproductive for employers to disregard the growing gap between rising costs and take-home wages.
Skilled employees are in high demand, and they’re taking their expertise to employers who are more willing to provide the 10 percent and 20 percent pay increases to keep up with not only inflation, but with employee expectations after two-plus years of slogging through the pandemic, taking on extra responsibilities for no additional pay after colleagues with nonessential positions were laid off. Most concerning to report is that the highest raises — 10 percent or more — typically went to the highest earners in a corporation, individuals with salaries of $150,000 or more. In addition, these high earners were most likely to have received a raise within the past year, while only 46 percent of lower income earners experienced the same.
Employers seeking to placate workers in the form of non-monetary perks, like company swag, happy hours or free snacks in the office, may find themselves disappointed by the lackluster reaction of burnt-out employees. Social media platforms like LinkedIn, Facebook and Instagram are littered with disgruntled employees making laughable and often viral posts about receiving the equivalent of “gold stars and pats on the head” when what they crave is higher wages to make ends meet as the cost of living continues to rise and basic survival becoming a main concern.
However, not every employer can afford to provide the significant wage increases that workers are requesting. While larger companies are more likely to provide a more significant raise to employees, a smaller organization may buckle under the financial pressure of 7.9 percent annual raises. It may be worth noting that a recent study of much of the workforce, including 69 percent of millennials, found that they would sacrifice monetary compensation, like employer-matched retirement and even raises, in lieu of a work-from-home or hybrid schedule that would improve or maintain their work-life balance.
Companies are seeing positive gains by opting to satisfy demands by providing coveted benefits to minimize monthly expenses.
Items like paid child care, unlimited paid time off, remote and hybrid work options, robust benefits packages and career advancement as additional forms of compensation are major contributors in employee retention.
In the end, whether increasing wages, providing additional benefits, modifying the existing work model or suffering turnover to competitors, all potential solutions have expenses. Organizations will be forced to weigh the cost of passing those expenses on to consumers, thus furthering the vicious cycle of inflation, or swallow overheads as the price of business.
Sara DeLaVergne is content specialist at Bedfordbased BANKW, parent company of the staffing and recruiting firms KBW, Alexander Technology Group, The Nagler Group, Sales Search Partners and KNF&T Staffing Resources.
