How much to raise employee pay in 2023 is the question on every leader’s lips. With the Great Resignation still ongoing, employers are facing the tightest labour market in recent history. But in the current environment of inflation, employees in many economies are being pressed to keep up with rising costs for basics including food, gas, cars, and housing.
Employers are in a tough position too. Business costs are being pushed up by the same inflation that is hitting employees’ purchasing power. Talent is increasingly prepared to jump ship for a salary raise just to keep up with the cost of living, yet employers may not have the budget to retain them. The employee-employer relationship will come under more strain.
These concerns were the focus of a recent LinkedIn Live session by People Matters under its Big Question series. Panellists Gaye Morris, People and Culture Leader (Pacific Region), Mercer Australia, and Kunal Wadhwani, CHRO, Choithrams Group, deliberated on pay raise and inflation.
What does inflation mean to HR leaders?
Ideally, employee salaries should increase as inflation does. But this is not always possible, and leaders might not even know how to make the right adjustments.
“Given relatively lower inflation in the past, many business leaders lack experience in adjusting budget and spending decisions during times of significant price inflation. This can create more problems in companies that can’t afford across-the-board pay raises to match the rate of inflation. Failing to boost employee compensation may mean (more) workers walk away, adding another layer of complexity in an already tight talent market,” said Gaye Morris.
How to combat inflation?
While heat in the economy is concerning enough, HR leaders are also dealing with financial setbacks and employee transition as they become challenging each and every day. In the face of inflation, Kunal Wadhwani recommended organisations who cannot offer a wage increase “to immediately improve employee benefits packages.” For instance, allow employees to work from home and improve their health insurance packages.
Monetary vs non-monetary rewards
While cash has the most impact, it isn’t the only way to reward employees. Non-monetary incentives help you keep your people enthusiastic, motivated, and engaged. “If your people feel they’re part of the organisation and something bigger, they know their purpose can be fulfilled by contributing to the business and community. That's what really starts to connect people to businesses,” said the People and Culture Leader (Pacific Region) of Mercer.
To learn more from leaders about some of the burning questions in today’s world of work, stay tuned to People Matters' Big Question series on LinkedIn.