Rapidly rising inflation requires creative business solutions

There’s an obvious problem creating unrest with workers today, and it’s creating a new battle for talent: inflation is increasing at a yearly rate of around 8%, while wages are increasing by roughly 5%.

With their hearts in the right place, nearly two-thirds of U.S. employers are increasing compensation budgets due to inflation. Others are putting the money towards recruitment and retention efforts, or simply sending bonuses to top employees. These attempts have proven relatively ineffective.

That’s because now, workers don’t care only about the money. Benefits, flexibility, and company culture are all vital to attract top talent and keep it long term. So although a great salary is going to be near the top of most everyone’s list, these other determinants will make or break your profitability.

To tackle rising inflation creatively, HR departments must:

• React promptly to resolve issues identified by employee feedback.
• Train and promote leaders from within.
• Consider alternative compensation structures.

React promptly to resolve issues identified by employee feedback

Nobody is going to be upset about receiving a one-time bonus. But a retention strategy that’s bonus-based feels cold and clinical, which makes it a suboptimal option to retain and recruit talent long term. Bonuses simply aren’t very personal or engaging.

Instead, listen to employees and fix the issues they call out. Ask for feedback from employees by creating polls or surveys, and then hear what they’re saying and make a plan to adapt business processes. Tracking feedback from your own employees is essential because the problems vary for every business, so it’s not enough to simply look up the most common responses online. Sourcing employee feedback externally can leave leadership blind to the challenges faced by the teams executing the work day in and day out. Without requesting feedback from employees directly, you can’t possibly know what employees need, and it can create a feeling that they have no voice in the business. When workers feel overlooked, throwing some money at it is a temporary band-aid on a larger wound.

If you’re stuck and bereft of ideas, talk to your top talent for insights. This provides a double benefit: people feel heard, and they will be more likely to buy into the issue. It’s amazing how people can start to see problems from a business perspective when they feel included.

Train and promote leaders from within

In the face of pay compression due to high inflation, always try to look within for training and promotion opportunities first, especially for small and medium-sized businesses.

It can be tempting for many HR departments to look at outside hires as the “perfect solution,” as if one employee can come in and change the outlook of the entire organization. That may be true for the highest ranking leadership positions, but it pays to focus on training the people already present in most scenarios. From a purely monetary perspective, it costs a lot more to bring on someone new than to invest in training and developing a current employee.

There’s a certain amount of loyalty and passion present with existing employees in general, or they wouldn’t still be working there. Promote from within and help them take the next step in their career, and it can inspire others to step up their game to capitalize on future opportunities. That’s the culture you want, not one where people feel easily replaceable.

Consider alternative compensation structures

Why do we get paid every two weeks, anyways? There may be a better option for your business.

For example, on-demand pay has been market tested by tech companies like Google and Uber as it gains traction worldwide. Many clients already use this new technology, even if it may sound unusual for a business leaning on the traditional 9-to-5.

But on-demand pay gives workers the funds they’ve earned instantly, so they don’t have to wait until payday to take care of all those lingering bills. The structure of on-demand pay has been industry-agnostic based on what we’ve seen thus far, so it isn’t just tech companies putting it to good use.

While on-demand pay may not work for every business, it’s always worth looking into how a different pay structure might perform better for your workforce.

Don’t dodge the conversation – own it

Not talking about inflation when it’s a major organization-wide concern is one of the worst things your leadership team could do. Employees care, and they are talking about it, so the best move is to control the conversation.

Discuss specifically what your organization is doing to mitigate the impact on employees. Being upfront will increase buy-in, as recruits, new employees, and tenured talent will feel like they are part of the solution.

If leadership’s plan is transparent and resolves employee concerns in an authentic way, knowledge becomes power, and people will support the company’s fight for survival. No one wants the company to go under and lose their jobs.

Related: 3 ways small businesses can attract and retain top talent amid today’s competitive labor market

These are difficult things to execute in practice. If leadership disagrees and has reached an impasse, bring on HR-certified experts to assess the scenario and ensure your tools and processes are cost-effective. HR pros can help reroute funds to where it creates the greatest impact if changes are needed, but you need to act swiftly. Otherwise, employee concerns will grow as workers start feeling like they are giving up wages for programs they don’t value.

The time to adapt is now, because inflation is here to stay.

Walter Sabrin, Senior Vice President of Recruiting Services for Vensure Employer Services