Inflation all over the world has created a cost of living crisis that has squeezed households harder than they have experienced for many years. An increasing tax burden and lack of real time growth in rates of pay have added to the overall reduction in household spending.
As a responsible employer, endeavoring to ease your employees’ pain while keeping your own organization lean and viable means juggling finances on a tighter tightrope than ever before. While you may be willing to keep salaries in line with inflation, the truth of the matter is that it is not always easy to. Any increase in outgoings means an immediate increase to your prices to your customers, and there comes a point at which alternative measures need to be found to help ease the process.
We’ve outlined some of those alternative measures below, to give you an idea of what else can be done to support your employees through the worst of these financial woes.
Carry out regular pay reviews
When inflation is relatively stable, an annual pay review is more than enough to ensure salaries are keeping pace. However, during more volatile economic times it is almost impossible to keep up to date across an entire organization in an achievable and orderly manner. Reward management consultancy Paydata advises that during these times you need to be monitoring the situation on an almost weekly basis, and following the advice of experts with regards to when and if a salary should be adjusted.
Keep an eye on your competitors too. By comparing your pay rates with those of your competitors both within your sector, and in your geographical location, will give you a good understanding of how others are reacting to the situation. The biggest risk of losing precious staff to competitors because they are paying better – make sure you stay ahead of the curve.
Implement a COLA Cost of Living Adjustments strategy
Implement cost of living adjustments to employee salaries. COLA increases are tied directly to the inflation rate, allowing employees’ wages to keep up with rising living expenses.
Introduce a variety of different pay structures
To take the heat away from the basic salary while times are still volatile, the introduction of different pay benefits which are tied to performance or the individual and the company as a whole could help to boost a monthly pay packet without committing your company finances to a permanent change at a difficult time.
Examples of this could be a bonus or profit share scheme, which will have the additional benefit of motivating an employee to perform better. This is an excellent opportunity to restructure your pay review process, tying in salary increases to performance evaluations as part of an overall drive to increase sales in an increasingly competitive market. Not only will this improve morale, but it will also help you to retain the top talent in your company (and possibly shed some of the time wasters).
Improve employee engagement and development
During periods of economic volatility, ensuring that your employees voices are heard is more important than ever. In general, there will be an understanding should it not be possible to continually increase salaries in line with inflation, and this understanding and patience needs to be recognized and rewarded.
An overview of any employee benefits package to ensure it is up to date and relevant will bring it in line with current trends. It will also give you an opportunity to send out a company wide communique, reminding your employees of its existence should they not be taking full advantage of it.
Ultimately the most important element of any strategy you follow is COMMUNICATION. Be open and transparent with your employees, keep in touch with them, consult with them – in time the volatility will pass and the sense of community and being part of a team will carry you all through intact.
