Inflation hit a 40-year high, with the consumer price index climbing 9.1% year-on-year in June, the Bureau of Labor Statistics reported Wednesday. The numbers rose even more than analysts expected – a stark reminder that a reprieve is a long way off.
Workers are continually feeling the effects as high food, housing and gas costs eat away at take-home pay — information that is prompting employers to rethink several workplace strategies, from back-to-work mandates to benefits tactics.
Employers who do not take a competitive approach to fighting inflation in a boiling labor market “will find themselves at a significant strategic and operational disadvantage if demand continues as expected, especially as other employers offer higher base salaries,” says Tony Guadagni, Principal. in Gartner’s HR practice.
So how does the inflation spike affect employers? Here are five areas where employers are feeling the impact and evaluating their strategies.
Social advantages. Experts say inflation is having a direct effect on benefits strategies, with several employers considering specific offers that could ease workers’ pain.
Benefits such as tuition and student loan repayments, fertility benefits, or health savings account matches can directly help an employee’s wallet. Yet some experts warn that too few employers are adjusting their benefits in real time to help employees fast enough.
Health care costs. Inflation is also causing some organizations to reexamine their employee health care cost strategies, even prompting some employers to delay increasing the employee share of their premiums to help workers as medical costs rise.
Meanwhile, as annual Health Savings Account contribution limits for 2023 have risen in one of the largest annual increases on record due to inflation, many organizations with health insurance plans at high deductible promote HSAs as a way for employees to save for medical expenses, now and in the future. .
Remote work. Employers have increasingly thought about bringing workers back to their offices after more than two years of embracing remote work due to COVID-19 concerns. But, among other reasons, soaring inflation is making some employers reluctant to force employees back into offices.
Offering remote work, hybrid schedules, or flexibility can help combat the rising cost of living, as it can give employees more control over their finances, travel, and living arrangements. It’s important to note that employees who work remotely reduce their trips to save on gas or other transportation costs, and they can more easily prepare meals and eat at home and avoid lunch or breaks. regular (and often expensive) coffee with colleagues.
Retirement. Soaring inflation is creating uncertainty among employees about how they approach their retirement savings. Data from Voya Financial, for example, found that 66% of employees say they are worried about how inflation will affect their ability to save for retirement, an even higher number for younger workers. Generally speaking, when the cost of living increases significantly, employees are more likely to reduce or forgo pension contributions, says John Lowell, an Atlanta-based partner at October Three Consulting, a pension consulting firm. retirement.
“Wage increases, at least in the short term in this inflationary environment, are not keeping up with inflation. They don’t get close,” he said. “This means that assuming they can meet their basic needs, people have less discretionary purchasing power. Employees are cutting back somewhere, and it’s probably not on the basics of life, like their groceries or their mortgage.
Usually, savings, retirement investments, or funding health savings accounts tend to be low-hanging fruit for cutbacks. This uncertainty and concern is prompting savvy employers to focus their attention on retirement strategies and increase their support for employees’ after-work savings strategies through communication, education, and maintenance of financial resources and benefits. . Employers are reminding employees of the merits of continuing to invest in their 401(k), even during an economic downturn, while other employers are increasing 401(k) contributions to help ease employee concerns.
Salary and Remuneration. An obvious strategy that is being scrutinized in light of soaring inflation? Salary changes. Sixty-three percent of executives plan to make compensation adjustments in response to high inflation, according to data released by Gartner, which surveyed 157 executives in March to understand how they deal with inflation issues.
“The #1 thing employers focus on is compensation when it comes to retention,” Guadagni said. HRE. “It’s not the only thing. But this is the most important thing. And if you have the opportunity, if you are able to increase salaries, you will do better in terms of retaining your employees than organizations that do not.
Meanwhile, some employers distribute bonuses and other lump sum payments to help improve employee finances.
Learn more about inflation-linked salary increases here.