How to Address Inflation While Hiring

Despite worries of a possible recession, employers continue to recruit and hire talent at rates exceeding economists’ forecasts. Earlier this month, the U.S. Department of Labor Statistics reported that total nonfarm employment rose by 370,000 jobs in June, and the unemployment rate stayed the same at a low 3.6 percent.

Less than a week later, the Department of Labor reported a 9.1% increase in the Consumer Price Index year-over-year. Although inflation is spread across many categories right now, the most significant contributors are gas, housing, and food prices.

Employers are straining to keep up

Many organizations began proactively increasing their employee compensation budgets earlier this year, but those increases aren’t keeping up with inflation rates. A survey in March by Salary.com showed that most companies in the U.S. were forecasting a payroll budget increase of at least 4% this year, less than half the rate of annual inflation. However, is it reasonable for employees to expect companies to keep up with inflation? 

According to a recent Forbes article that explained the difference between consumer inflation and labor market growth, it can be difficult for companies to meet that expectation. Many employees don’t agree – especially middle-income workers with incomes between $50,000 and $150,000 – according to a recent survey by CNBC. Two-thirds of American workers say their salaries aren’t keeping pace with inflation, and many are even considering quitting. Some companies, like Microsoft and Apple, are responding with pay raises.

So, with an estimated two jobs for every job seeker, how do employers address concerns about inflation as they recruit and hire talent in what is still a very competitive hiring landscape?

Financial compensations

Base salary

Although consumer inflation goes up and down, salaries are “sticky,” meaning once they are increased, it’s difficult to reduce them. This can make employers hesitant to increase base salaries, but most candidates say it’s the top consideration when evaluating a job opportunity.

Another reason some companies hesitate to hire new employees at higher base salaries is “pay compression”, where a more experienced employee is making the same or less than the new hire. As pay transparency gains traction with forward-looking companies and job seekers (who expect to see at least a range of salary on a job description), equitable pay throughout an organization is a long-term consideration.

Robust benefit packages

When offering a higher base salary doesn’t make sense, there are other ways to compensate employees financially. A creative benefits package that addresses financial pain points for workers can help reduce the effects of inflation on their personal budgets. For example, an upgraded benefit package could include:

• Increased healthcare coverage
• Student loan assistance
• Subsidies for childcare
• Subsidies for eldercare
• Increased contributions to retirement plans
• Continuing education reimbursements

The bottom line? Get creative and tailor your benefits package to your company’s employees.

Bonuses

Other incentives

Flexibility

Working remotely, at least part of the time, used to be a perk for select employees. Now, many professionals expect it and are even willing to accept lower pay for a fully-remote or hybrid work schedule that enhances their quality of life.

A new study by economists found that 38% of companies surveyed expanded remote work opportunities over the last year “to keep employees happy and moderate wage-growth pressures,” and more companies have plans to do the same.

The financial savings for both employers and workers are considerable. For example, in large cities like Chicago and New York, where long commutes to business centers from outlying areas with more affordable housing are typical, gas prices are having a profound effect on employees. And for companies, in addition to offering remote work schedules in lieu of pay raises, they are also saving money on office space, supplies, and utilities.

Culture

In addition to flexibility, candidates are studying the culture of companies more carefully than ever. Investing in culture used to mean providing elaborate offices designed to keep workers at work as much as possible. Now, organizations are investing in culture by:

• Committing to Diversity, Equity, and Inclusion initiatives
• Setting and respecting boundaries for healthy work-life balance
• Providing modern leadership training
• Communicating meaningful updates to employees
• Supporting Employee Resource Groups (ERGs)
• Demonstrating respect throughout an organization
• Surveying employees on a regular basis
• Celebrating successes

Professional development and upskilling

Giving employees the time and resources to learn new soft and hard skills can be invaluable to your business. Not only does upskilling your workers benefit you in obvious ways, like more efficient procedures that benefit your company’s bottom line, providing ongoing professional development can also enhance:

• Your company’s reputation
• Employee satisfaction
• Employee retention
• Advancement opportunities
• Relationship building