Inflation rates are the highest they have been since 1991, and salary increases are not necessarily keeping up. This is problematic especially for lower income employees, who may struggle to make ends meet.

According to industry reports:

• In April inflation grew to 9.0% (CPI) compared to the year prior.
• Pay budgets increased by 3.0% across industries.

Whilst organisations in the private sector, mainly banks, had large increases in bonus payments skewing total wage growth to 6%, organisations in the Public sector had to deal with pay increase restrictions. Organisations in the Civil Service, for example, continue to deal with government guidance that resulted in a pay freeze last year and a maximum pay budget increase of 3.0% in 2022.

Consequently, a common question we get from our clients is how they should adjust their reward strategy in response to the above, in order to support their staff with increasing cost of living pressures and reflect the current market to stay competitive.

Logically, when pay rises are behind inflation employers need to consider how to keep their staff engaged and feeling valued. Turning a blind eye to employees that are unhappy with their reward, especially in the current climate, can lead people to feel disengaged and potentially look elsewhere. It is easy for turnover rates to creep up, especially now there is a shortage of skilled workers to fill a growing number of job vacancies. Thus, organisations will need a clear, consistent, and competitive reward strategy if they want to keep attracting, retaining, and engaging talent.

What you can do to mitigate inflation

So, what could you do to mitigate inflation? If your organisation can afford it, increases to pay review budgets would be advisable. With increases in budget, you could invest in mid-year pay reviews and pay awards that will help your employees with the increased cost of living. This could be a reasonable starting point especially since it looks like inflation is not likely to wear off in the foreseeable future.

When you increase employee base pay or pay awards/bonuses it is important that the reason behind those increases is communicated through clear messaging that is congruent with your organisation’s culture and Employee Value Proposition (EVP - that is what your current employees love about your organisations and why they choose to stay). This ensures they are better received and people know what they are being rewarded for.

As mentioned earlier, employees on a lower wage are especially hit hard by rising inflation. You could help this group through:

• Pay review enhancements especially targeted at employees more vulnerable to inflation.
• One-off (non-consolidated) payments/supplements.

These one-off payments are a good option to mitigate risks of pay inflation and future affordability.

Is your pay budget tight? Focus on your EVP. In several projects we have found that approaching reward issues in the broader context of the Employee Value Proposition relieves pressure on pay. This can lead to more comprehensive and sustainable solutions that make a lasting difference on employee engagement.

Some other things that can be done that will require smaller financial investments are:

• Introducing or raising awareness of emergency loan facilities for employees who need help in case e.g. their boiler breaks down or they have an essential bill they can’t afford to pay.
• Introducing flexible working options for those eligible to save transport costs.
• Distributing discount vouchers for certain essential goods or services.
• Allowing the option of selling annual leave can help employees have a little extra flexibility to increase their salary when they need some extra cash.
• Raise awareness to any other financial wellbeing benefits that you have that can help employees in difficult financial times.

Now, if you are curious about what other organisations in your sector are doing to mitigate inflation fill in QCG’s salary planning survey before 10th June 2022 and receive a free copy of report through the following link:

https://forms.gle/SRn3XMq5oAMon4dg7

Your data will be processed anonymously.

About QCG

QCG is an expert and friendly consultancy helping you deliver fair and engaging reward, recognition, and employee experience. If this article was useful to you, and you want more help with reassessing your reward strategy, please contact me at ku/oc/gcq//ennasil or call +44 (0)20 7462 4800.