Employers all over the United States have experienced challenges in the past few years, including high inflation. This issue seems likely to stay around for a while, and it makes recruiting and retaining employees more difficult for many businesses. In this article, we'll discuss how to support employees and attract new hires while the economy has high inflation.
What is inflation?
Inflation is an increase in the prices that people pay for items and services such as groceries, rent, car payments, and clothing. It's the percentage that average prices increase from year to year. The costs of different items change at various rates, while prices for other items may stay the same or even fall. When prices decrease on average instead of increasing, it's called deflation. However, this usually happens only during economic downturns.
The Federal Reserve adjusts interest rates and other aspects of the economy to keep inflation as close to 2% as possible, but it's not always successful. Recent high inflation increased the cost of living for individuals and lowered the purchasing power of their paychecks. While interest increases have slowed inflation, the rate still hasn't reached the Fed's goal.
The U.S. Bureau of Labor Statistics uses the Consumer Price Index to measure inflation. It records the average prices of goods and services and provides more specific averages for categories such as transportation, energy, and food.
"Matching inflation with higher wages is an excellent way to prevent these issues, keep employees happy, and attract new applicants. Unfortunately, not all businesses can afford to increase employee payments to compensate for inflation."
As the cost of living rises for employees and their wages stay the same, they often become less motivated to go above and beyond at work. Many people start looking for other positions with better pay. Inflation impacts people with lower pay, such as entry-level employees, the most. However, it can affect people at every point in their career. Even high earners may need to adjust their budgets and give up luxuries, such as vacations, because of inflation.
Should employers match inflation?
Matching inflation with higher wages is an excellent way to prevent these issues, keep employees happy, and attract new applicants. Unfortunately, not all businesses can afford to increase employee payments to compensate for inflation. Many companies experience increases in the prices of supplies, materials, and shipping because of inflation, so they don't have the funds needed to give people raises. Even if your organization can't offer employees the raises they ask for, you can attempt to find a compromise that doesn't harm your business's bottom line.
It's a good idea to avoid raising prices to pay higher wages when possible. This can make inflation even worse and force your company to continue increasing pay and prices. Fortunately, there are many other ways to support employees during high inflation.
Hire from within
With internal recruiting, large and small businesses can find quality personnel without spending money on advertising open roles, signing bonuses, or recruiters. Training is less costly for current employees who get promotions, and these individuals already understand the company culture. Even if you need to make an external hire to fill a promoted employee's former role, it's usually less time-consuming and expensive than looking for someone to fill a higher-level job.
Internal recruiting also encourages employee loyalty. It lets people know that your organization values skilled workers. The possibility of a promotion makes applying for jobs with other companies less appealing. It reduces turnover and increases retention, even when inflation is high.
Offer attractive bonuses
Offering bonuses instead of wage increases can help your company get better returns on its investments. Giving a monthly or yearly bonus to high performers incentivizes employees to be more productive. Rewarding people who stay with the company for several years on their work anniversaries helps increase retention rates. With a referral program, you can offer rewards to any employee who recommends a candidate who eventually accepts a job offer.
In many circumstances, the funds your organization spends on bonuses will be less than the increased profits your business receives from better productivity and more sales. A permanent raise may not persuade individuals to keep doing their best after they receive it.
Bonuses are more flexible than regular salaries as well. Along with offering bonuses, you can reward your employees by:
- Offering commissions for sales or other accomplishments
- Giving employees company stock options
- Sharing a percentage of the company's profits with high-performers
- Providing the best team members with extra paid vacation days or time off
Offer flexible schedules
Many people don't need to perform their jobs from company headquarters or during regular business hours. Consider letting people decide their own schedules. People can often increase their productivity by working when they feel more focused. Some employees may prefer to do some work on weekends, and others may want to start early in the day or complete more tasks in the evening.
Giving team members the option to work at different times or take a day off when they feel they need a break can lead to better retention rates and a happier workforce. It also reduces burnout and stress.
Let people work remotely
With many jobs, employees can work from anywhere through a computer. Having remote workers decreases costs by reducing the amount of office space your company needs. Many remote workers are willing to accept lower salaries because they don't need to spend time commuting or pay for fuel or public transportation. You can even hire people based outside the U.S., where the cost of living is much lower, and employees are willing to accept a lower salary.
If you want to speak with people in person to make sure that the team works well together, consider offering hybrid positions. Employees can spend most of their time working from home and come to the office for meetings or in-person tasks two or three days per week. To help people work remotely, you may need to provide a good internet connection, a powerful laptop or computer, and software for client relationship management and video conferences.
Provide health and retirement benefits
Getting health care and preparing for retirement are expensive, and many people struggle to pay for insurance, cover medical bills, and accumulate retirement savings. Providing health and retirement benefits along with a base salary and bonuses helps attract new employees and increase retention. You can increase workers' peace of mind by giving them the health insurance they need to get through emergencies and helping them achieve their retirement goals. Offering gym memberships and mental health services helps people stay healthy and productive as well.
Businesses with 401(k) accounts for employees often offer matching and vesting. The company matches employee contributions up to a certain percentage, and employees get access to these matched funds after they stay with the organization for a certain amount of time. This provides a financial incentive for people to keep their positions instead of looking for jobs with other businesses.
By finding ways to support employees during high inflation, you can continue hiring top talent, encourage people to continue working with your company, and help everyone stay motivated and productive. Dealing with inflation is difficult, but supporting your employees lets them know that your organization cares. Helping people withstand tough economic times can increase loyalty and make your business more successful.
Learn more about how to support employees during high inflation:
Promoting from within has many advantages, including increasing retention and encouraging people to stay with your company.
Supporting employee well-being helps everyone withstand the effects of inflation.
To make recruiting during high inflation more successful, consider hiring someone who was laid off.
To improve retention, learn why employees consider leaving.