During and after The Great Resignation, and The Great Reshuffle, compensation emerged as a key factor in a company’s ability to hire and retain employees. And employees who changed jobs during the pandemic reported higher earnings as a result. Now companies are facing drastically rising inflation in 2022.
This dramatic series of events has damaged many companies’ ability to keep their compensation competitive. A typical wage increase is around 5%, but with inflation rising to 8%, employees still see an average drop of 3% in their adjusted wages…even with an average raise. To receive a raise that actually feels like one, many employees feel that they have to find a different job. Raising wages by more than 5% isn’t feasible for some companies, but there are other strategies a business can take to stay competitive.
A natural concern for employers is how to sustain wage increases at a level that’s desired by employees when inflation is running at historic rates. One alternative is to offer competitive, achievable, performance-based bonuses where the results benefit you both. This strategy enables driven employees to reach their desired wage goals while allowing companies to stay competitive with high-performing workers. A competitive bonus structure can also help attract top talent who are confident in their ability to reach those goals. As an added benefit, if employees qualify for their bonus, then the company benefits too.
Another way to lower costs for your employees is to switch to remote or hybrid work or offer a commuter stipend. Of the expenses most effected by inflation, the top one for many Americans is the price of gas. Suppose your company could help alleviate that issue by supplementing their gas budget or eliminating the employee’s commute altogether. In that case, your company could go a long way in stretching the employee’s existing paycheck.
These two strategies can help you keep up with the competition, but to lead in the job market, you will probably need to raise wages to stay competitive. While attracting top talent is essential, what is even more important is keeping the talent you have from leaving. Hiring a new employee will often be more expensive than giving your existing employees raises to match the market, and when you take the latter approach, you don’t have the added cost of training. Examine what you’re willing to pay a new hire and make sure that you compare that to your current employee’s salaries and raises. Even at the same pay rate, keeping an employee will cost less than spending the money to hire.
What is right for each business will vary. If you need further help or guidance evaluating a compensation and bonus structure that keeps your employees happy and also works for your business financially, our team of HR experts at Peoplr are ready to help.
Don’t forget, you can also chat with us via the online chat tool in the lower-left corner of your screen. We love helping companies align their people with their business needs, and we love to share what we know.
