COVID-era inflation might have peaked at 9.1% in June 2022, but it’s still going on. In fact, the October consumer price index increased by over 3%. Some of these year-over-year price changes are negligible, like a 2.4% increase in electricity costs. However, other categories, like food away from home, are up over 5%. While many employees have received cost-of-living raises and other salary increases in the past couple of years, inflation has offset a lot of that progress. How can you help your employees cope with inflation?
What Is Inflation?
Inflation is the term used to refer to price increases throughout an economy or in specific industries. When inflation is high, purchasing items will be more challenging because they are more expensive. The opposite of inflation is deflation, which is a decrease in prices. One example of inflation is the increase in the cost of the average cup of coffee. In 2000, you could buy a cup of coffee for $1. However, that $1 in 2000 wouldn’t buy a cup of coffee in 2022 when $1.85 would be needed.
The Problem of Inflation Outpacing Compensation
One of the big struggles employers face when dealing with periods of high inflation is the rate of inflation outpacing the compensation that they are able to offer. If salaries don’t increase at the same rate as prices, it can lead to serious frustration. A new survey indicates that the average raise in 2024 will be 4%. If inflation stays at 3%, that raise will only feel like a 1% increase.
What Can Employers Do?
Employers are often very sympathetic to inflation concerns that their employees are facing because they are facing them too! There are a variety of ways that you can offer value to your employees and help offset the burden of increased costs, including:
- Offering “inflation raises” that are designed to adjust salaries to current inflation rates. Be careful with this because it could artificially inflate compensation and is hard to unwind. Consider inflation bonuses, loans, or stipends.
- Providing extra benefits, including things that don’t necessarily cost anything like extra paid time off. See our blog on Emergency Savings Accounts.
- Offering flexible or hybrid work arrangements, which can help employees decrease their spending on gas and commuting
- Providing employees with financial education resources to help employees manage their money properly
- Encouraging employees to take advantage of free extra training or courses to help improve their skills and resume
Even if you do not have the funds to offer inflation-based raises, there are many free ways to help employees feel like you are hearing their concerns, including hybrid work arrangements and more PTO.
What Can Employees Do?
Employees might feel helpless in the face of inflation, but there are many ways that they can fight back, including:
- Making a budget to understand where their money is currently going
- Cutting out unnecessary expenses, even if they are small
- Shopping sales and using coupons for groceries and other consumable items
- Paying off high-interest debt, like credit card debt, to lower monthly payment obligations
- Looking for freelance or part-time work that can help increase their income to offset expenses
- Seeking support from friends, family, or a professional to talk about financial concerns
The right benefits for your business depend on a variety of factors, so working with the right partner is key. To learn more about how our team can assist you in designing and implementing attractive benefits packages that help your employees offset inflation, please call our office at 240-422-8799 or email Jessica Storck at Jessica.storck@tribridgepartners.com.
