In the wake of rapidly rising inflation, many employers have begun budgeting to support their employees through this drastic period of rising expenses. Inflation in the UK has now exceeded 9%, while the US is experiencing a 6.8% rise in consumer prices this year.
These high inflation rates mean that although many companies have expanded their pay rise budgets, employees are unlikely to reap the benefits of a salary increase, according to the WTW Salary Budget Planning Report.
Per data from 22,570 organizations, WTW found that 64% have budgeted for higher pay raises than last year, and only 45% are refusing to increase the pay raise budgets to which they agreed at the beginning of 2022.
Companies are recognizing the role that they must play in supporting their employees through high prices of essential goods, an unstable housing market, and increased economic uncertainty.
WTW’s data says that compensation budgets, such as discretionary bonuses, have increased by 7.3%, as employers understand that a mere pay raise is insufficient in the wake of historic inflation levels.
Effects of the ‘Great Resignation’
Employers are not merely increasing salaries out of the goodness of their hearts. Unprecedented attrition rates during the ‘Great Resignation‘ are forcing corporations to better support their employees and thus keep them from leaving.
WTW reports employee attrition levels are currently at 17% per year, with 12.3% of those employees leaving their jobs voluntarily.
To combat this great fluidity of the job market, 68% of organizations have increased workplace flexibility and 44% have implemented diversity and inclusion efforts. Another 44% are offering monetary incentives through bonuses.
As inflation continues to rise and organizations attempt to budget for amplifying their employees’ salaries, they may realize that the frequency of salary adjustments may be more important than a one-time monetary increase.
According to WTW’s research, 23% of companies have plans to grow the number of salary increases this year for their employees.
Paul Richards, reward data intelligence leader for WTW in Europe commented: “2022 has seen growing financial pressures across the board, but [UK] inflation is forecasted to drop to 3.6% in 2023, whilst average pay rise budgets are projected to stay at 4%, which should help to close the gap on rising costs.”
Ultimately, as prices continue to rise, corporations have an obligation to keep supporting their employees keeping in mind that this is, hopefully, a temporary period of uncertainty.