According to the U.S. Department of Labor, as of June 2022 the inflation rate in the US was 9.1%. This was the largest annual increase in inflation since 1981 and the second year in a row for higher-than-average inflation (7% in 2021).
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High inflation has most families struggling to accommodate rising prices for everyday necessities, including gasoline, groceries, and housing. Employers have given some pay increases, but not enough to keep up with inflation. As a result, employees in the US are facing a record 4.4% decline in real wages year over year, according to Chief Market Strategists at InvestSMART.
In this article we will discuss how to find out the impact of inflation increases on employees, why it is important for employers to act, and nine ideas for how employers can help.
Ask Employees Where Inflation Hurts Most
To deliver the most effective support to your employees with the lowest impact to your bottom line, it is important to make sure your efforts are targeted. A recent survey of hourly workers conducted by Branch revealed “gas/fuel (82%), food/groceries (82%), and home/rent prices (57%) as areas of biggest struggle in employees’ personal finances.” In addition, the 2021 Workplace Wellness survey by Employee Benefit Research Institute (EBRI) found “sixty-five percent of employees said their debt level was a problem.” Either way, American employees are feeling the pain of growing inflation.
Conducting a quick survey with your employees can give you a better understanding of the ways they have been impacted by the rising inflation. Do you have employees facing food insecurity? Struggling with the costs and burdens of caregiving for family members? Once you understand the most pressing pain points for your workforce, you can fine tune your response and provide resources they’ll actually want. You can also use a survey as an aid to help you identify employees who might be at risk of leaving the company if offered higher wages by a competitor.
Why it is Important for Employers to Help
In addition to caring about the financial wellbeing of your employees, there are two important reasons why employers should try to help employees cope with inflation.
First, although the Great Resignation shows signs of slowing down, turnover is still quite brisk. Employees who aren’t making ends meet with their salary are more likely to look for other opportunities. Keep in mind, replacing those employees will probably require offering a higher wage in addition to having to spend money recruiting and training a new worker.
Second, nearly half of workers say anxiety over their finances distracts from their work. They are struggling with debt—especially credit card debt, student loans, and medical debt. This can lower productivity and decrease mental health. According to BrightPlan’s 2021 Wellness Barometer Survey, “financial stress causes an average of 15 hours in lost productivity and engagement per week.” Helping your employees feel more secure about their finances can boost workplace efficiency and morale.
9 Ideas to Help Workers Mitigate the Impact of Inflation
Salary increases. According to Gartner, “63% of organizations plan to adjust wages in response to inflation.” Similarly, Human Resource Executive reports that the majority are “implementing larger salary increases this year than 2021—about 4.8% on average.” Some employers are also making mid-year compensation adjustments.
Giving a salary raise is the most obvious and direct way to lessen the impact of inflation on employees. But is it the right strategy? Experts warn rising labor costs can create an inflationary wage/price spiral that is hard to correct down the road. It might be safer to offer temporary relief in the form of special bonuses or stipends which can be discontinued when inflation slows.
Bonuses. If you need to pay employees more, it would be a win-win to achieve greater productivity in exchange. So, if you haven’t had a performance-based incentive plan before, start one now. Empower employees to earn more by performing to a higher level. Take extra care to ensure the hourly workers most impacted by inflation have highly achievable ways to earn bonuses.
Remote work / commuter stipends. If your company can offer remote work, it is one way to lower employee costs without giving a raise. Remote work removes the costs of gas, parking, and car maintenance as well as reducing spending for items like coffee and lunches out. Fully remote employees might even be able to live further from the office and lower their rent or mortgage.
If your employees must come to the workplace, recognize that this represents additional cost to them, not merely inconvenience. You may consider adding a stipend to help them cover commuting costs.
Emergency savings accounts. Nearly 68% of employees surveyed by EBRI said they would be “interested in an emergency savings fund” they could contribute to through payroll deduction, but less than 23% actually have this benefit offered by their employer. More than half of employees have only their employer retirement plans as a source of potential emergency savings.
Hold off on insurance premium/deductible/co-pay increases. Unfortunately, employer healthcare benefits costs are rising at an even faster pace than inflation. But employees are tapped out and cannot absorb additional cost-sharing this year. Get creative this year with strategies to hold down healthcare costs.
Discounted prescription drugs. Even with decent health insurance, some prescriptions may be prohibitively expensive or may not be within a plan’s formulary. A discount program can help find coupons that may result in a lower price for prescriptions than an employee’s insurance co-pay.
Financial wellness benefits. The Branch Report found “nearly half of hourly workers have $0 saved for emergencies.” Employees need help with financial management skills like budgeting and saving. Providing financial wellness education and tools can be an affordable way for employers to help.
Caregiver benefits. Employees who care for elder parents or who have children in daycare tend to face increased financial stress and hardship. A Merrill Lynch study found “40 million family caregivers in the US spent $190 billion each year taking care of loved ones.” Employers can consider helping through extra paid leave or flexible work schedules.
Same day pay. For employees struggling to make ends meet, it can be especially stressful waiting for the next payday to arrive. Offering weekly paychecks is a start. Even better is same day pay—also known as earned wage access. More employers are starting to offer same day pay and even using it as a recruiting tool to attract hourly workers.
Educate Employees About How Their Benefits Help
Make sure your employees know about and understand how to use their employer-sponsored benefits, including any new programs you’re launching in response to inflation. They may not be taking full advantage of their current benefits. A simple lunch-and-learn presentation or video sent by email can help remind employees of the ways your organization stands ready to help them with the rising cost of living.