How Pay Transparency Can Help Combat Inflation
Supporting employees in a way that fights inflation can be challenging for HR professionals. A simple pay hike may not be an appropriate solution. Here, Jeanniey Walden, chief innovation and marketing officer, DailyPay, discusses how pay transparency can help combat inflation.
Dealing with inflation isn’t as simple as implementing higher wages. Inflation has added to the thorny list of challenges for HR professionals, which includes the nagging pandemic and the ongoing Great Resignation. Combating inflation in a way that supports employees can be complicated. Strategies for dealing with inflation comprise a delicate dance between money, benefits, and wellness programs. As prices rise and salaries (for the most part) remain stagnant, American workers will be challenged to understand their financial health better. HR professionals are leveraging technology that can provide creative financial solutions to help employees combat inflation.
The Challenge of Matching Raises With Inflation
While the easy solution would be for companies of all sizes to grant their employees a 7.5% pay increase, imagine the following scenario: depending on your current state of hybrid work, you either march into the CFOs office or set up an online meeting during which you say, “Hey, I know you’re busy, but I’m sure you saw the latest inflation figures, and I need a 7.5% salary increase. Across the board.”
“Right,” says the CFO. “Reasonable request. I’ll do it right after lunch.”
See, said CFO is a bit sarcastic. It’s unlikely a financial leader would ever approve a 7.5% wage increase, even if the cost of living goes up in accordance with inflation, which it will do if current geopolitical and domestic issues hold. In fact, 7.5% could even be considered conservative. The current inflationary spiral puts HR executives in a tight spot. Yes, inflation will cut expendable income, and no, the CFO isn’t going to see a wage hike as doable. A recent research report from Grant Thornton finds that just 57% of CFOs are optimistic about the next six months, down from 69% in December. To address the inflation issue, 52% of CFOs said they would focus on cash flow, liquidity, and bolstering cash reserves as their first choice.
So much for that 7.5% solution.
Why Inflation Conversations Are About More Than Just Payroll
Dealing with inflation from an employee engagement, recruitment, and retention standpoint isn’t as simple as recalibrating payroll. Here’s where the dance between wages, benefits, and wellness comes in… of course, wages are important. A February 2022 Gallup research poll showed that pay and wellbeing-related issues had risen significantly in recent years, taking spots one and two in importance at a job. About half of workers are looking for jobs that provide greater stability and security than they currently have. Why? Because, as Gallup says, “stability and security are based on future expectations; as expectations for the future change, what job security means is likely to change too.”
See More: Top 3 Payroll Trends to Follow
How Employers Can Address Inflation in Hiring
This begs the issue of inflation’s potential impact on recruiting, especially in retail, hospitality, and healthcare, all of which still have acute staffing shortages. Some companies in these verticals, Costco, for example, are still offering signing bonuses. Benefits are changing as well as a result of the seeming ebb of the pandemic and inflation. Payscale found that companies are offering a wider range of benefits this year than they had pre-pandemic.
Of those benefits, innovative financial wellness technology tools, including on-demand pay and pay transparency, have become increasingly popular. In fact, recent data indicates that companies that leverage on-demand pay can hire up to 2x faster than employers who don’t offer the solution and retain employees for up to 73% longer. When employees can track their earnings on their phones and have this unprecedented visibility into their pay balance, it can be quite empowering.
For the average American worker, the ability to know exactly how much money they have after each shift can make a huge difference in their spending habits. Perhaps they realize they’re short for upcoming expenses and need to pick up an extra shift. Or, in contrast, they might have earned more than they anticipated and can contribute toward their retirement fund. Regardless, it eliminates the uncertainty associated with traditional two-week pay cycles and allows employees to take control of their finances.
After all, knowledge is power, as they say.
How are you supporting your employees to combat inflation? Let us know on Facebook, Twitter, and LinkedIn.
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