Inflation might not be top of mind in your concerns about external factors affecting your workforce – and that’s exactly the problem.
Inflation is a stealth issue undermining the morale and confidence of many company’s teams at an individual level. As inflation has caused the cost of goods and personal expenses to rise dramatically in the past few years, employees have an unspoken question on their minds.
“Why isn’t my compensation increasing as well?”
They might ask each other this question, but companies generally don’t have conversations between leadership and teams. Left unaddressed, team members’ feelings of being neglected, overlooked, or even mistreated can grow unseen, eroding team morale from within.
It’s an understandable situation. This is a conversation we haven’t had to have for a long time. The last time inflation hit rates like today was roughly 40 years ago in the 1980’s.
So, how do you react to this unspoken concern? We have a few ideas to help you
Inflation Intervention Tactic #1 – Open Up the Lines of Communication with Your Team
Sometimes the simplest solutions are the best. Talk to your people.
Transparent, honest communication is one of the most effective ways to protect the trust and morale of your workforce.
But what should you talk about?
For one thing, a little education is probably in order.
Employees tend to view economic inflation and compensation inflation as intertwined when in truth, they are driven by two very different factors.
- Economic Inflation is based on the cost of goods and the market.
- Compensation Inflation is based on the supply and demand for labor and how hard a company needs to compete for talent.
And historically, rises in compensation rates don’t follow the same erratic trends as inflation. They remain quite steady over time.
Understanding that the market for talent is very different from the market for food, gas, and other essentials can help employees. However, transparent communication about the company’s financial state can help them much more.
This is your opportunity to reframe the conversation around inflation and compensation and tie compensation back to the company’s profitability and success.
For example, how has inflation affected your profits? Is there a story to be told that you have worked hard to keep everyone employed in the current conditions? Inviting your team to understand the company’s challenges can go a long way.
Help your people understand the real factors affecting their compensation.
Give them a vision of what it means for the company to succeed and for everyone to profit—what it will take to increase their pay. Make them part of the solution instead of leaving them alone to speculate on the problem.
The best venue for these conversations depends on your company’s internal culture. Maybe it’s a town hall with open discussion. Maybe it’s written communication or through individual conversations with well-prepared managers and leaders. What’s most important is that you don’t leave the issue unaddressed.
Inflation Intervention Tactic #2 – Look Beyond Compensation for Ways to Support Your Team
What other tools are available to help you address the pressure of inflation on your employees? What are other perks, benefits, or programs you can offer that will demonstrate your concern and care about the issue to your team?
- Practical measures like gas reimbursements or public transportation passes can help ease the burden on your employees’ commute. This can be a powerful symbolic acknowledgment of the challenges they are facing.
- Embracing flexible work arrangements like remote work helps employees address many of the expenses involved in their commute, from gas to parking, food, and childcare. The positive impact on both their budgets and work-life balance can be substantial.
- Never overlook the benefits of promoting team morale during inflationary periods. Organize team-building activities, social events, and recognition programs to keep spirits high and reinforce a sense of unity within your team.
- Consider providing employees with access to financial advisors. Often, the answer to economic pressure isn’t making more money but getting better at managing the money you already have. Financial advisory services provide employees with personalized guidance on budgeting, saving, and investing during times of high inflation.
- Offering educational programs and workshops related to personal finance can empower employees to make informed financial decisions aligned with their unique circumstances.
All of these initiatives and others like them will communicate care and concern to your team. Collectively, they can help to improve employee satisfaction, lower turnover rates, and protect your productivity in turn.
Inflation Intervention Tactic #3 – Avoid Reactionary Changes to Your Compensation Structure
The risk of losing critical talent might tempt you to make rash decisions about compensation rates, but managing compensation during inflationary periods requires careful planning and foresight. Rather than making hasty decisions, HR professionals should adopt a structured approach centered on maintaining pay equity and fiscal responsibility.
Stability is the key to navigating inflationary periods. Making sudden changes, especially at an individual level, risks creating an imbalance in pay equity and exposing you to legal action penalties.
The best thing you can do is to stay the course in terms of your current policies. Continue to offer merit-based salary adjustments based on accomplishment and contributions and according to clear, consistent guidelines.
Engage with Compensation Design Experts to Find the Best Path Forward
Compensation is an unbelievably complicated issue, and it helps greatly to have a qualified expert analyze your current practices and guide you in making improvements.
There could be many opportunities for you to improve pay equity and enhance your total rewards packages in ways that will make a real impact on your team members’ daily lives and morale.
At Xenium, we put more than 20 years of experience and the collective expertise of more than 80 HR professionals behind custom HR consulting solutions for your business. We excel in supporting small to mid-sized businesses through challenging circumstances like the current inflationary conditions in our economy.
Learn more about our custom HR support services at XeniumHR.com or schedule a call with our experts here to discuss your current challenges with compensation.