With inflation continually rising and not much of a light at the end of the tunnel, most of us are bound to feel the pain of higher prices for months—or years—to come.
In May 2022, the year-over-year increase in consumer prices hit a fresh 40-year high of 8.6%, according to the US Bureau of Labor Statistics, and this rose to a whopping 9.1% in June. For perspective, the long-term average US inflation rate has been about 3.2%, but consumers had become accustomed to the more moderate annual increase of just 1.75% between 2010 and 2019. Many economists expect inflation to remain elevated through 2022 and into 2023.
In Canada too, the inflation rate has reached its highest point in half a decade, and employees are struggling with the ever-ascending cost of life. Canada’s annual inflation rate was 8.1% in May of 2022, marking a 39-year high. By July, this was down to 7.6% but still a far cry from manageable for your average citizen.
Why employees are anxious about inflation
According to the American Psychological Association, 87% of Americans are stressed about the heightened prices of basic everyday goods like gas, food, and other essentials, not to mention the rising cost of credit cards and adjustable mortgages.
Canadians are likewise feeling stressed, especially due to higher grocery prices. Thirty-eight percent of respondents to the FP Canada Financial Stress Index survey said money was their biggest source of stress for the fifth time in eight years—nearly twice that of personal health, work or relationships. One in three respondents said financial stress was leading to anxiety, depression or mental health challenges.
The current inflationary reality is this: the soaring price of everything results in a lower quality of life for many people. Inflation is effectively another tax on purchases, one that takes huge chunks out of paychecks.
According to Bloomberg economists Andrew Husby and Anna Wong, the average US household will have to spend an extra $5200 annually ($433 per month) just to access the same goods and services as the year before.
One recent study found that 58% of American families (about 150 million employees) are living paycheck to paycheck, making it the most common financial ‘lifestyle’ in the country. Notably, even 30% of those earning $250,000+ are also living paycheck to paycheck! Likewise 27% of working Canadians spend their entire salary each time they get paid, while 7% spend more than they make—with parents twice as likely to spend beyond their means.
And finally, if we wish to look more globally, a recent Deloitte survey found that 46% of Gen Zs and 47% of millennials around the world also live paycheck to paycheck and are regularly very worried about making ends meet, not to mention their ability to save funds and possibly even retire someday.
Why employers should care
All this financial anxiety undeniably extends to employers as well, what with the cost of manufacturing and logistics rising, plus, of course, the demand for better salaries. Challenging though it may be, it’s time to pay more attention to employee financial stress and find ways to help them through it.
While you should be concerned about employee anxiety for the simple reason that it distracts from work, turnover—much like inflation—has reached unsustainable highs. Last year we were calling this unprecedented turnover ‘The Great Resignation,’ and then that was amended to ‘The Great Reshuffle.’ In other words, people aren’t just quitting—they’re switching for something better.
Last year, an unprecedented 47.4 million Americans voluntarily left their jobs for better work. For comparison, 42.1 million people quit in 2019 and was considered the tightest labor market on record. Meanwhile, according to a recent survey by ADP Canada Co., 24% of Canadian workers have recently switched jobs. The survey found that for 88% of employees considering switching jobs in the next six months, with compensation as the determining factor.
Strategies to address employee concerns about inflation
So, realistically, how can you help your employees deal with inflation, thereby reducing the risk of losing them in today’s ultra competitive labor market?
Consider the following strategies for making life as a modern employee that much more manageable. By extension, you’ll be making your own life a lot more bearable too.
1. Adjust employee pay.
Employers need to take action to ensure their pay is competitive—and not just for new hires. Look for pay gaps among your long-term employees too and adjust accordingly. Award bonuses if you can.
A recent XpertHR survey found that the median percentage change for total salary budgets from 2021 to 2022 is an increase of 3%, while a Conference Board survey revealed that companies are setting aside an average 3.9% of total payroll for wage increases next year—the most since 2008.
2. Offer more paid time off.
If you’re not able to offer raises or bonuses, there are other benefits that can be offered. One of the most easily accomplished (and appreciated) is extra paid time off. PTO can come in a wide variety of forms, from birthday PTO, to half days on Friday, or summer hours, to name just a few. While salary is significant, extra PTO also has a very positive impact on employee retention.
3. Improve benefits.
There are many creative ways to improve employee benefits that might not have occurred to you. Tuition reimbursement, elder care, child care, pet insurance, 4-day work weeks, and/or access to fertility and parental benefits or other supplemental healthcare benefits are widely understood as difference-makers, and therefore worth considering. But that’s just scratching the surface.
4. Foster a healthy culture.
Often, it’s not compensation but underlying issues in the work culture that drive employees to quit. Consider implementing an EAP program as a way of contributing to mental health support. Employers should stress the importance of work-life balance, celebrate work well done, provide and solicit feedback, and provide employees with opportunities for development and growth. Ensuring staff are not burnt out not only helps to create a healthy environment—it also boosts productivity.
5. Consider going hybrid or remote.
Recent trends have revealed that employees are more likely to leave their jobs if employers insist on a full return to in-office work. Love it or hate it, after three years of Covid, many employees have become accustomed to remote or hybrid work. Offering these as potential options can help counteract rising costs by reducing transportation and food expenses, and ultimately helping employees feel they have a bit more control over their finances— all while remaining productive.
6. Pay attention to your most affected employees.
Low wage employees are, naturally, among those most affected by soaring inflation. Consider taking a “living wage” approach and set minimum wages internally. You might also assess whether starting wages should be increased, particularly in this inflationary market. Consider offering lump-sum awards, stipends, or commuting assistance to assist employees in need.
Ultimately, nothing is easy in 2022, but employers nonetheless have a choice to make: either find meaningful ways to help employees cope with the effects of ever-rising inflation, or suffer losses in the form of high staff turnover and lower productivity.
Where there’s a will, your company can find a way, even if it means thinking way outside the box. You got this.