When inflation goes up, as it most certainly has over the last year or so, employees feel the pinch. Less purchasing power will mean more people will start to browse for better-paying jobs, which adds yet another challenge for Hoosier business leaders to overcome. What if there were a way to mitigate this? Could some kind of inflation wage strategy be used to keep workers happy and retain them in their current roles?
One Hoosier Example
Some companies in Indiana are taking a serious look at various forms of inflation wage plans to keep their workers from falling behind. One of the most visible examples of this came from Goshen, IN-based Viewrail, a manufacturer of staircases and stairway components. Earlier this year, the company announced a new inflation protection plan as an offering to its employees.
Under the company’s plan, workers will receive a cost-of-living wage increase to match the shifts in inflation. On a quarterly basis, the company will be reviewing inflation rates from the Bureau of Labor Statistics and adjusting worker pay accordingly. So, for example, if inflation goes up by 1% one quarter, then Viewrail will add a 1% base wage increase to its payroll.
“This program does not replace or eliminate the opportunity for wage growth based on individual performance, said Viewrail Human Resources Manager Kim Menczynski. “It is purely designed to ensure no one loses ground to inflation in 2022.”
If inflation goes negative one quarter, the company said it will not be reducing wages immediately. Their plan is to only reduce wages if negative inflation persists over more than one quarter or has an impact on business performance.
Keeping Workers Happy
The whole notion of this kind of inflation-based wage increase goes back to that old refrain that asks, “Are your employees better off than they were a year ago?” Even at a time when budgets for employee raises are becoming stronger, many workers could see their increases gobbled up by inflation.
For example, we know that companies gave an average 2.8% raise to their employees last year, according to a survey of over 1,000 firms from Willis Towers Watson, an insurance brokerage firm. But the Consumer Price Index had risen to 6.8% from November 2020 to November 2021, effectively putting those workers at a loss even though their pay increased.
For 2022, those same surveyed companies are expecting to pay an average 3.4% raise to workers. Other sources, like business research nonprofit The Conference Board, put the figure at 3.9%. Those are both higher than last year, but may not overcome the price hikes that many households are facing.
As these workers start to lose purchasing power, naturally they’re going to start browsing around for better-paying jobs. The average job switcher scored an average 5.1% increase in October of 2021, according to data from the Atlanta Federal Reserve. That’s a huge problem for employers already dealing with labor shortages.
Thus, implementing some form of inflation wage plan and marketing it to employees as an attractive new benefit offering may go a long way toward retaining talent. It sends a strong signal that your company has the best interest of your employees at heart.
Financial wellness support is one of the biggest new trends in employee benefits this year. If companies choose to set up an inflation wage plan, one core recommendation from most experts is to market and promote it among employees. This really maximizes the wage investment by leveraging the plan as a recruitment and retention tool. The more employees feel valued, the more likely they are to remain with their employers over the long term.
Staying Ahead
With inflation on the minds of many Hoosier workers, companies may want to consider adding their own version of an inflation protection plan. It’s an investment that makes people feel valued and secure in their current positions, which is good for retention. Plus, it’s an additional value-added offering to cite during a company’s recruitment efforts. Anytime companies can help employees stay ahead of rising costs and remain financially stable, they’re sure to bring in great rewards.
