The Compensation Conversation: Inflation, Trends & Strategy
With the unemployment rate remaining at record lows throughout Q2-2022, employers continue to navigate the toughest recruiting market many have ever experienced, with ongoing staffing shortages, wage pressures, and supply chain challenges stemming from the current economic uncertainty and market volatility caused by accelerating inflation and chaotic market conditions.
Trends in compensation have evolved dramatically in recent years, particularly as the coronavirus pandemic reshaped the labor market. With the so-called Great Resignation in full swing, employers are looking for ways to retain workers, and pay is top of mind. As employees retain the upper hand in the labor market, pay equity and transparency have taken center stage in compensation strategy.
Building a successful compensation plan that supports your employees and your bottom line is critical, and yet far too many organizations don’t take the time to develop one that properly works for them. Employers planning to succeed in an increasingly competitive environment must have a well-designed compensation plan that motivates employees, controls compensation costs, ensures equity, and allocates financial resources appropriately.
As reported in September of 2021, WorldatWork's 2021-2022 Salary Budget Survey found that salary increase budgets were projected to grow to 3.3 percent on average in 2022, up from 3 percent in 2021. However, three short months later, the average budgeted increase for 2022 was revised to 3.9%. And according to a recent CNBC study, workers can expect to see average raises of 4.1% in 2023 — the largest pay bump since the Great Recession.
More and more organizations are updating their compensation philosophy, strategy and plans in an effort to remain competitive in the war for talent. However, not all organizations have, can or will choose to adjust pay based on inflation. Considering the lesser-known yet undeniably overall direct and indirect cost of a high turnover rate and an inability to retain and recruit top talent, fair and equitable compensation strategies are actually one of the best ways to stay ahead in today’s market and economy.
Compensation has never been only about wages… as this compensation shift continues, employers must objectively weigh and communicate the overall compensation value proposition to their current and future workforce.
Contact The Arnold Group today to discuss how you can stay ahead in the increasingly difficult fight for top talent.