A March article from the Wall Street Journal highlighted how companies dealing with the double whammy of high inflation and high turnover are looking for other ways to keep employees happy without raising salaries. Salary increases are not only expensive, but they also become a permanent part of a company’s bottom line, according to the article.
When it comes to making the call, finance chiefs are tasked with setting compensation budgets. One determinate being if a company can pass along increased salary costs to customers. But those in the role of CFO are often resistant to raise salaries as a hedge against the possibility of higher inflation and deteriorating economic conditions.
Just over one-third of all organizations said they plan to adjust compensation to account for inflation, according to a December survey from Gartner, Inc., an advisory firm. The survey found only 13% planned to adjust compensation for all employees.
Cost of Living
Although spending on wages and benefits in the corporate sector rose in 2021, this was often the result of the high number of resignations, according to the U.S. Labor Department. But these wage adjustments have not kept pace with the cost of living, which continues to rise across the board. Consumers throughout the U.S. and the world are dealing with record levels of inflation, 5.9% in December and 7.9% in March.
Significant rises in the cost of food, gas and consumer goods continue to make it difficult for consumers to maintain the same or similar standard of living. Moreover, salaries and benefits are often benchmarked against competitors rather than being reflective of current economic conditions.
Benefits not Salaries
Companies that are not looking to raise wages are exploring other benefits to retain and engage employees. These include offers of additional vacation days and permanent work-from-home options to counter salary freezes. With employee resistance growing in response to calls to return to the office, flexible work arrangements might become a good compromise for employees and employers alike.