High inflation is widespread across the world.
The Consumer Price Index in the United States increased 8.3% for the 12 months ending April 2022, with the cost of energy up 30.3% and food up 9.4%. It’s no surprise that Americans view inflation as the top problem facing the country today.
Canada’s inflation rate increased to a 31-year high of 6.8% in April, mainly due to increases in the cost of food and shelter. Food prices have risen by 9.7% in the past year, while shelter costs are up by 7.4%.
Similarly, Eurozone inflation hit a record 8.1% in May amid surging energy and food costs. Countries along the Russian border that have been cutting back on Russian gas have seen especially high inflation, with Estonia’s inflation rate reaching 20%.
The cost of living crisis may be a real threat to your team members in 2022. Here’s how you can help support them.
1. Revisit compensation
Inflation and quit rates have encouraged companies to revisit their compensation budget. An August 2021 World at Work survey revealed 3.3% average and 3.0% median for 2022 planned salary budget increases. But another survey by World at Work in January 2022 reported an average salary budget increase of 4% average and 5% median.
While planned salary increase budgets might exceed those of recent years, they’re not enough to keep up with the rising cost of living. Most organizations (85%) expressed concern that inflation would erode the value of pay increases.
This might impact your ability to retain talent, as compensation is the top reason for employee turnover and many organizations are boosting pay for new employees. In fact, 29% of employees who left their organization during the pandemic are making over 30% more, and 20% received a 10% to 20% increase.
Revisit compensation so your team members don’t have to find a new opportunity to get through the cost of living crisis. A bump in pay can help them keep up with inflation, and help you stay competitive in the talent market and save money in turnover costs.
2. Expand your employee benefits
There are many employee benefits that can help your team members through the cost of living crisis. Consider incorporating some of these into your employee benefits package and communicating them with your team members:
- Retirement matching. The cost of living crisis may require your team members to cut back on savings so they can focus more on their current expenses. Help your team members save money for the future by offering a 401k or tax-free savings account (TFSA) matching program.
- Corporate discounts. Small savings can add up in a big way over time. Organize group rates to lower your team members’ cost for things like mobile phone services, gym memberships, or event tickets.
- Mental health care. Financial struggles can impact your team members’ overall wellbeing. Create a mental health toolkit to better support your team members, encourage them to get help when they need it, and allow them to be their best selves.
- Commuting benefits. Gas prices are soaring, and commuting benefits can help offset the cost of inflation in this area. For example, provide pre-tax commuter benefits, offer to arrange carpools, or expand your wellness stipend to cover the cost of a bicycle to ride to work.
You might also host a financial wellbeing lunch and learn to review these benefits and provide additional information to help your team members ride out the cost of living crisis.
3. Offer remote work
Your team members can save an estimated $600 to $6,000 per year by working at home half the time. Remote work can reduce costs associated with:
- Commuting. Remote and hybrid workers save money on things like gas, parking, insurance, car maintenance, and public transportation fares.
- Eating out. Team members working from home are more likely to have the time, energy, and resources to make healthier choices by preparing their own meals rather than eating out.
- Clothing. Remote work can reduce the need to buy business casual attire, and help your team members save on dry cleaning costs.
- Childcare. Eliminating a commute can reduce the amount of time your team members need childcare coverage—and the corresponding cost of that extended care.
Employers may also save an average of $11,000 per half-time hybrid worker per year. This is due to increased productivity, lower real estate costs, reduced absenteeism and turnover, and better disaster preparedness. Consider distributing those savings to offer a remote work stipend to help your team members set up a home office and cover some utilities, or to cover the cost of a coworking space or a coffee shop beverage.
An offset in expenses and remote work stipend can help your team members reallocate their personal budgets and better weather the cost of living crisis.
Final thoughts on the cost of living crisis
Your team members and your organization are probably both feeling the pinch of inflation. While a cost living compensation adjustment would certainly help your team members get through the crisis, it may not be a viable option for your organization.
Communicate with your team members to help them understand why you can’t offer them more and what you can offer instead. This might be a bonus or stock grant, more flexible work options, or benefits that can help them through the cost of living crisis. Do what will work best for your organization and team members so you can all endure this economic crisis.