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The United States is in a precarious situation. Rapidly rising inflation, at a 41-year historic high, is causing concern for workers. The U.S. is still experiencing the lingering effects of the virus outbreak and is worried about the potentially ruinous confluence of inflation, recession, layoffs, the possibility of stagflation— not seen since the 1970s— a bear market in securities, war and increasing costs.
Rather than wait for employees to ask for a raise, empathetic leaders should proactively look after the financial well-being of their staff and discuss options to help them cope with this new economic environment.
There has been some movement in this effort. According to the Society for Human Resource Management, in March, the average weekly wage increased by 5.6% compared to last year at this time.
Increase Compensation
Smart managers should increase pay. Although the nation is dealing with a challenging economy, employment is still holding strong. If businesses don’t address the needs of their people, the best and brightest will be recruited away or they’ll leave of their own volition to pursue opportunities that offer a substantial pay increase.
Business leaders can’t be complacent about the new reality. The U.S. Bureau of Labor Statistics reported the consumer price index, which measures the cost of goods, outstripped the wage gains, as it grew by 8.5% year-over-year in March. This was the biggest yearly increase since 1981. As inflation rises, it will only get worse for people.
Companies have options. In addition to raises, businesses can offer bonuses, stock options and other forms of remuneration. In a January 2022 survey conducted by Gartner of 71 companies, around 37% of organizations self-reported that they are planning to consider inflation with their compensation budgets. Unfortunately, only 13% intended to raise the compensation for all employees, due to rising inflation. Since that time, inflation has continued to rapidly increase.
Starting from February 25 to March 7, "A survey of employers 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 growing their salary merit-increase budgets by 5% or more." While it's good to see that action is being taken, the single-digit increases may not be sufficient.
Remote Work May Help Alleviate Some Of The Pain
By now, it should be glaringly obvious to business leaders that inflation is taking a big bite out of their employees’ paychecks. For many people, it feels that they are earning less money, as the dollar is devalued and losing its purchasing power. As the costs of food, clothes, cars, rent and other essentials rise in price, a person’s paycheck isn’t keeping up.
Team leaders should be encouraged by executive leadership to sit down with their staff and discuss how they can enhance pay to compensate for the rapid rise in inflation. In addition to enhanced payments, the company could offer remote work options.
If a person is allowed to work remotely, they won’t have to commute, which will cut down on costly gasoline consumption. If they take mass transit, which is expensive, there will be a reprieve on those expenses as well.
When you are forced to go back to the office, you usually buy breakfast, lunch and sometimes dinner or drinks after work. In big cities, this could easily run from $20 to over $30 a day, which is more than $1,000 a year. There is also the need for purchasing a new corporate wardrobe after being at home for two years. Working at home, you can buy in bulk and save a lot of money compared to dining out or ordering in, when you’re based in an office setting.
Enhanced Benefits
The most recent U.S. Census Bureau household survey found that over a third of Americans indicated that they are having challenges paying expenses. The number of people reporting that they are experiencing budgeting challenges ranks near the worst time of the pandemic in early 2020.
Seeing this problem, companies need to get creative with their benefit programs. Progressive businesses could help by reducing costs associated with healthcare benefits, offering student loan assistance, providing subsidies for child and elder care and taking advantage of the plummeting stock market by offering higher contributions to retirement plans that could grow tax-deferred and potentially lead to substantial gains years later. Management should also explore offering policies specifically tailored toward the individual needs of workers.
Attracting And Retaining Talent
Even the most cold-hearted executive must recognize that while the job market is still relatively hot and it’s hard to find and retain workers, they need to take action. If they don’t offer higher salaries to job seekers, they’ll go elsewhere. When current employees aren’t offered increases in compensation, they become disenchanted and disengaged and will eventually join the Great Resignation movement. They’ll quit, pursuing roles with companies that provide a better overall compensation package that will help them get through these tough times.
