by Gege Tan on Sep 28, 2022
by Gege Tan on Sep 28, 2022
Nothing has impacted the 2022 global economy more than inflation. The pandemic, supply shortages, combined with the recent Russian-Ukraine War, have sent the price of goods and services soaring across the world. While employers are forced to find ways to cut costs to turn a profit, workers, on the other hand, are asking for higher pay to combat the rising cost of living. So, the question to consider is, how should employers navigate while supporting their employees?
Inflation, put simply, is a broad rise in the prices of goods and services across the economy over time. Most people feel the effects of cost-of-living increases in their daily lives. For example, gas prices hit over $6 per gallon in California for the first time. Food delivery prices and the cost of groceries will all increase 10% to 11% by the end of 2022 (USA Today). According to the U.S. Department of Labor, as of June 2022 the inflation rate in the U.S. was 9.1/%. This was the largest annual increase in inflation since 1981 and the second year in a row for higher-than-average inflation (7% in 2021).
With the cost of living being at a record-high, according to a study done by the Society for Human Resource Management (SHRM), 87% of HR professionals are worried about inflation and said their highest concern was the effect on the lives of their employees (EHS). On the other hand, 43% of employees say they want financial action to be taken to offset inflation, according to a March 2022 Mercer survey.
The good news is that the majority of employers care about their employees and are actually taking action to increase salaries. About 63% of organizations say that they’re going to adjust wages in response to inflation, according to Gartner research. And a survey of employers by compensation data firm Salary.com finds that most U.S. organizations (73%) are targeting a payroll budget increase of 4% or more this year.
However, the amount of salary increase doesn't seem to be enough to perfectly offset the extraordinarily high rate of inflation. Data from the Bureau of Labor Statistics monthly jobs report shows that although wages have increased by 5.6% over the past 12 months, the cost of most basic necessities (groceries, rent, gas, and mortgage payments) have risen between 10% to 48%. This has put pressure on employers to risk losing their talents to competitors if they don't increase salaries. When salary increases are not in line with inflation, what else can employers do financially to assist their employees? Here are some alternative compensation approaches to help employees ease the burden of the high cost of living:
According to a Great Place to Work®, which analyzed companies from 2006 to 2021, including during the Great Recession, it is shown that companies that delivered consistently great workplace experiences suffered the smallest losses and were the quickest to rebound post-recession. Moreover, companies that value diversity, equity and inclusion (DEI) and keep improving the experience of marginalized employees, tend to thrive during economic downturns (Kitterman).
Here at IntelliPro, we are proud to be certified as a Great Place to Work, as we are committed to joining efforts to help our employees combat high inflation. Being a normal part of a business cycle, recession could be a great opportunity to see whether a company is able to stand the test. This is not the first time IntelliPro has witnessed a slowdown in the job market. During the past few volatile years, IntelliPro not only survived but thrived and experienced amazing growth. We are determined to eliminate unconscious bias in the workplace by mandating DEI awareness training for all employees. By offering a diverse and inclusive environment, our workplace is filled with creativity and innovation, which is ultimately why we are able to have a strong employee retention rate even during the period of economic downturn.
Looking at the big picture, the inflationary moment we're in right now won't last forever and the economy will eventually go back to a healthy state again. As mentioned in our previous post. 'Rapidly Changing Job Market Trends and What is Actually Going On' , the job market is going through unprecedented change and while some companies have implemented hiring freezes, the demand for top talent still remains strong. It's important to keep in mind that inflation does not only affect the working class; employers are also going out of their way to help their employees cope during these times. If they don’t, they run the risk of having distracted, stressed and unproductive workers —and worse yet, they risk losing employees to better-paying jobs—which is especially possible in today’s competitive job market.
“StackPath.” n.d. www.ehstoday.com. Accessed September 30, 2022. https://www.ehstoday.com/health/article/21246445/companies-worry-about-effect-of-inflation-on-employees-wellbeing.
Kitterman, Ted. n.d. “How to Support Employees as They Face Rising Inflation.” Great Place to Work®. https://www.greatplacetowork.com/resources/blog/how-to-support-employees-with-rising-inflation
“Inflation Moderates for Second Month; Used Car Prices Stop Rising.” n.d. Kiplinger. https://www.kiplinger.com/economic-forecasts/inflation
McDermid, Bailey Schulz, Phillip M. Bailey, Ken Tran, Elisabeth Buchwald and Riley Gutiérrez. n.d. “No More Steak. Ordering out Less. Here’s How Inflation Is Squeezing American Diets.” USA TODAY. Accessed September 30, 2022. https://www.usatoday.com/story/money/2022/09/22/inflation-daily-life-average-american/10382646002/?gnt-cfr=1