Our country is seeing soaring inflation the likes of which we haven’t seen for more than forty years, but what can employers do to help shoulder some of the burden their employees are facing as they struggle with increasing costs? While matching inflation with salary increases is not always a feasible option, there are many things employers can do to help their employees feel supported through these economically challenging times.
In October, the U.S. Bureau of Labor Statistics reported a 7.7% increase in the Consumer Price Index (CPI) over the last year. As a measure of the average change in prices in a fixed market selection of goods and services, the CPI is the standard measure of the rate of inflation. And with numbers still pushing the largest increases in more than 40 years, it’s no surprise our pocketbooks are feeling the strain of our country’s soaring inflation. With the rising cost of most things, employers are struggling to keep up. U.S. employers are budgeting an overall average salary increase of only 3.4% in 2022. Though a notable increase over the average salary increase in 2021 of only 2.8%, this still represents less than half the inflation rate.
Many wonder why the rising cost of goods and services doesn’t translate to increases in salary, too. But the truth is increases in the costs of goods and services are not powered by the same things that contribute to wage increases. Consumer prices are driven by changes in supply and demand of goods (like groceries and fuel) while salaries are powered by changes in supply and demand for labor. Consumer prices also tend to fluctuate, with costs rising and falling to match supply and demand. Wages, on the other hand, tend to remain more fixed, and once they go up, they don’t usually come down. This makes wages more stable, but also less likely to react quickly to fluctuating market conditions.
Though matching inflation dollar for dollar with salary increases will not be feasible or practical for most companies, there are several things employers can do to help employees weather the current economic storm.
As the most obvious way to combat inflation, this may not always be the best option long-term. While the CPI may fall for many reasons, such as the Federal Reserve raising interest rates or supply increases reducing demand for certain goods, salary increases are often a permanent thing. With that being said, any boost, however small, to your employees’ take home pay will help.
Performance-based incentive programs are a great way to inspire employees to give their best effort at work while also helping them combat the current surge in inflation. In addition to helping combat inflation, these bonuses can improve morale by reminding employees that their extra effort is appreciated and rewarded, which in turn can help with employee retention.
With energy prices increasing 17.6% over last October’s numbers, one great way to help employees combat inflation is by reducing commuting costs by offering remote or hybrid work options. Doing so indirectly increases your employees’ wages by reducing time and money spent on transportation to and from work. This option has the added benefit of improving employee retention by offering the much-coveted flexibility many are looking for these days as they seek a healthier work-life balance.
One very important part of combatting the rising inflation is understanding that, like you, your employees are stressed. Prioritizing personal time and mental health days can help reduce burnout and have a profoundly positive impact on reducing workplace stress, anxiety, depression, and even heart disease. When salary increases aren’t a feasible possibility, offering and encouraging the use of additional time off can help bridge the gap and foster a much more positive company culture that prioritizes employees’ health and wellness.
Like everything else, health insurance premiums and plan deductibles continue to rise at alarming rates. However, many employees are already tapped beyond what their budget will allow and simply cannot shoulder the burden of higher premiums or deductibles. Work with your insurance broker to get creative finding ways to limit or reduce health insurance premium increases as much as possible.
With employees spending more of their everyday budget just to keep a roof over their head, food on the table, and their family clothed, they may be pulling back from contributions to their retirement accounts, which can have devastating long-term impacts. Even a 2% increase in employer contributions can have a significant impact, not only on how supported employees feel but also in easing the burden employees are having to shoulder through this surging inflation.
From offering gift cards for groceries and gas to providing daycare subsidies or even fertility benefits, these added perks can go a long way in helping employees manage soaring inflation while also fostering increased loyalty for your company. These perks show an understanding of the struggles your employees may be facing and offer tangible support that demonstrates your commitment to them.
At ClarityHR, we believe HR should have a head and a heart. A big part of combatting the current inflation is in understanding the difficulties employees are facing. Human Resources is more than compliance; it is an extension of your company philosophy. Maintaining your team is at the core of your business. Let ClarityHR help you come up with creative solutions to keep up with inflation. Contact us today to schedule a consultation.
