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How Pay Transparency Can Help Combat Inflation

  • 7 mths ago

Dealing with inflation isn’t as simple as implementing higher wages. Inflation has added to the thorny list of challenges for HR professionals, which includes the nagging pandemic and the ongoing Great Resignation. Combating inflation in a way that supports employees can be complicated. Strategies for dealing with inflation comprise a delicate dance between money, benefits, and wellness programs. As prices rise and salaries (for the most part) remain stagnant, American workers will be challenged to understand their financial health better. HR professionals are leveraging technology that can provide creative financial solutions to help employees combat inflation. 

The Challenge of Matching Raises With Inflation

While the easy solution would be for companies of all sizes to grant their employees a 7.5% pay increase, imagine the following scenario: depending on your current state of hybrid work, you either march into the CFOs office or set up an online meeting during which you say, “Hey, I know you’re busy, but I’m sure you saw the latest inflation figures, and I need a 7.5% salary increase. Across the board.”

“Right,” says the CFO. “Reasonable request. I’ll do it right after lunch.”

See, said CFO is a bit sarcastic. It’s unlikely a financial leader would ever approve a 7.5% wage increase, even if the cost of living goes up in accordance with inflation, which it will do if current geopolitical and domestic issues hold. In fact, 7.5% could even be considered conservative. The current inflationary spiral puts HR executives in a tight spot. Yes, inflation will cut expendable income, and no, the CFO isn’t going to see a wage hike as doable. A recent research report from Grant Thornton finds that just 57% of CFOs are optimistic about the next six months, down from 69% in December. To address the inflation issue, 52% of CFOs said they would focus on cash flow, liquidity, and bolstering cash reserves as their first choice.

So much for that 7.5% solution. 

Why Inflation Conversations Are About More Than Just Payroll

Dealing with inflation from an employee engagement, recruitment, and retention standpoint isn’t as simple as recalibrating payroll. Here’s where the dance between wages, benefits, and wellness comes in… of course, wages are important. A February 2022 Gallup research poll showed that pay and wellbeing-related issues had risen significantly in recent years, taking spots one and two in importance at a job. About half of workers are looking for jobs that provide greater stability and security than they currently have. Why? Because, as Gallup says, “stability and security are based on future expectations; as expectations for the future change, what job security means is likely to change too.”

Continue reading: https://www.toolbox.com/hr/benefits-compensation/guest-article/how-pay-transparency-can-help-combat-inflation/

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