By Kari Meillat
KMA Compensation Manager
Are your employees asking for a raise due to inflation? This conversation – very prevalent these days – is best dealt with proactively and thoughtfully.
Recent market data shows that companies are already responding to inflation. While wages are rising at their fastest pace in decades, the increase has not kept pace with the Consumer Price Index. Companies are finding the need to increase their merit budgets to unprecedented levels. Some employers are also reporting more midyear raises and bonuses as a strategy for employee retention. Not only are companies dealing with compensation questions, but also a tough recruiting market if they need to replace workers. According to a recent survey from Pearl Meyer, about one-third of large employers in the U.S. are considering midyear raises to retain employees.
Salary.com’s survey of more than 1,000 companies in a range of industries conducted in June, 2022 found that the median 4% increase planned for 2023 is across all employee categories – executives, managers, and exempt and nonexempt employees. A quarter of employers surveyed plan to give increases in the range of 5–7%. And 48% said they planned on salary budget increases that are higher or significantly higher than in 2022.
If you’re wondering what you can do to be proactive, here are our recommendations:
- Check the market data for your positions to validate current competitive pay.
- Review your salary structure or pay bands. When were they last updated?
- Look back at previous merit increases to determine if you have maintained pay through inflation.
- Consider implementing a COL (Cost of Living) increase along with your merit program.
- Looking beyond compensation, determine if your benefit costs to employees have increased. What other rewards do you offer that could help offset inflation costs?
- Continuously review current employee pay as you recruit and hire new employees.
- Talk to KMA. Our compensation experts can help you think through other ways to retain and reward your employees, conduct a market data review, or review your salary structure to help you stay competitive.
While it’s uncertain what the future will bring in terms of inflation, we know we need to show appreciation to our employees to retain a satisfied, engaged and productive workforce. You can do this through your base pay programs, bonus or spot bonus programs, recognition, development, and well-being. Listen to your employees and regularly share your appreciation. Base pay is important, but it’s not necessarily the main reason employees decide to stay or leave.
If you would like to discuss compensation strategies in today’s period of high-inflation, reach out to the experts at KMA today.