The past few years have brought a series of extra challenges for employers all around the country. One of them is high inflation, which is still here, and it seems it's likely to stick around for a while. Whether it occurs naturally or as a result of unproductive economic policies, the reality is that money continuously loses some of its value, and this has a ripple effect on employee recruitment and retention.
What is inflation?
In simple terms, inflation is a rise in the average prices we pay for goods and services. It's expressed as a percentage, and its main consequence is that you can't buy as much as you could in the past with the same amount of money. While not all goods and services change their prices at the same rate, their average change over time indicates the average rate of inflation in the economy.
The Consumer Price Index (CPI) analyzes price variations for representative goods and services in the United States, also breaking them down by category. This can make it easier to assess the overall inflation rate over a specific time period, both for the economy overall and for specific sectors, like food, transportation, and energy.
How can inflation affect hiring and retaining employees?
Sharp rises in prices can have various effects on a business owner's ability to recruit quality personnel and keep them over the long term. As employees see their cost of living continuously rising and their wages remaining stagnant, they may become less motivated to do a good job and start browsing around for other jobs that may offer them better pay and benefits. This impacts lower-paid employees the most, as their budget is already likely to be stretched to the limit on a monthly basis. This doesn't mean that higher-paid employees aren't dissatisfied seeing their savings diminishing in value.
The most obvious way for an employer to mitigate this is by offering higher salaries. However, this may lead to new challenges, as a larger employee compensation budget is likely to eat into the company's profits. This is particularly challenging for small businesses, which may lack the budget flexibility to offer wage increases that match inflation rates. This means that you may have to get creative with what you offer new and existing employees.
Ways to hire and retain employees in times of high inflation
Here are some of the ways you can make new and existing employees happy in times of rapidly rising consumer prices:
Raise their salaries
You may not be willing or able to raise salaries at the same rate as inflation, but that doesn't mean that you shouldn't at all. Try to find a salary level that allows your employees to have fulfilling lives and doesn't affect your organization's bottom line.
Ideally, this means that you won't have to raise prices to keep up with your increasing wage bill, as this can create a vicious circle that makes inflation rise even more. Also, raising the salaries too much may become a serious budget issue if and when inflation rates stabilize, and you may be left with an overpaid workforce.
Try to hire from within
Companies of all sizes can find quality personnel within their own ranks without having to spend money on recruiters and signing bonuses. Your current employees are likely to enjoy working for you, or otherwise they would change employers. This means that training them for more advanced roles and promoting them can be a cost-effective alternative to bringing in someone from outside the organization. Even if you still have to hire someone to fill your promoted employee's former position, hiring for lower-level roles is usually less expensive and time-consuming.
"Finding ways to hire top talent and retain existing employees in times of high inflation can lead to a more competent and loyal workforce, which may ultimately result in a better bottom line for your organization."
Create an attractive bonus structure
Even if it involves larger costs for the organization, paying your employees bonuses incentivizes them to perform well and improve their work output. Bonuses are also more flexible than base salaries, and you can reduce them when inflation rates eventually return to normal. Besides offering bonuses for exceptional performance, you can also reward loyal employees on their work anniversaries and create referral programs that offer rewards for any employee who recommends a viable job candidate.
Besides paying them money directly as a bonus, some other potentially cost-effective ways to reward your employees include:
- Offering them commissions for specific accomplishments
- Giving them company stock options
- Sharing a percentage of the company's profits
- Providing your employees with extra paid vacation days
Consider expanding your employee search
Modern technology helps professionals in many different fields perform their work from virtually any location, with just a laptop and internet access. While most countries in the world are facing above-average inflation rates, recruiting from a worldwide talent pool can help you connect with experienced and talented professionals with much lower salary demands than their American counterparts.
This means you can hire people to work for you from all over the world for lower wages and without having to provide them with a physical workspace. To help remote professionals match the productivity of those who physically come to work every day, you may have to invest in new technology. Besides a solid internet connection and fast PCs or laptops, you may also need specialized software for video conferences and client relationship management.
Offer flexible schedules to your existing employees
Odds are that some of your existing employees don't necessarily have to perform their tasks from your company headquarters from 9 a.m. to 5 p.m. If their roles allow it, consider offering them the option to be flexible with their work time and location. Some employees may be more productive in the afternoons and evenings, while others live far away from work and waste many hours commuting. Giving them the option to perform their work duties at different times of day and from other locations, whenever feasible, is likely to lead to a happier workforce and better employee retention rates.
Provide your employees with health and retirement benefits
A good employee compensation package doesn't only include a base salary and bonuses. It also includes additional benefits, such as health insurance. Helping your employees feel more at ease with the thought of potential health-related expenditures can lead to a significant rise in retention rates. Other related perks you can offer include mental health programs and wellness incentives, like gym memberships.
Also, your employees are likely to plan ahead for their retirement. Contributing to their retirement funds can help them feel more at ease with their long-term future, especially in times of high inflation. This makes them less likely to look for work elsewhere, while not offering them retirement benefits can have the opposite effect.
Build a positive company culture
It's important to remember that most people aren't solely motivated by material gains. Employees generally spend a third of their time at work, and having a workplace with like-minded people and a space in which they can express themselves can do wonders for their morale, productivity, and loyalty. Creating a company culture that enables this isn't easy, but the results are definitely worth it, as it's an inexpensive way to boost both employee recruitment and retention rates.
High inflation rates don't seem to be going away for the time being, but every challenging situation can be an opportunity for companies to grow. Finding ways to hire top talent and retain existing employees in times of high inflation can lead to a more competent and loyal workforce, which may ultimately result in a better bottom line for your organization.
More tips to improve employee retention and recruitment:
Learn why your employees are leaving and how to avoid it.
Worried about employees focusing on other activities? Find out why 29% of employees are willing to seek a side hustle or second job.
Expand your recruitment techniques by learning how to hire someone who was recently laid off.
