Following two years of economic turmoil triggered by the pandemic, many companies would have thought the worst was behind them. Yet 2022 has thrown a new wave of challenges which undermines the productivity, growth, and ultimately, survival of UK firms.
With inflation rising up to 9% – a 39-year high and recent figures displaying that annual pay growth stalled at 4% in May, many workers are demanding a pay rise to offset the rising cost of living.
This week we have seen rail workers embark on three days of industrial action and demand a minimum pay rise of 7%. With barristers, teachers and nurses also discussing plans to join the strikes over the coming weeks it is clear that this issue isn’t going to go away and will soon transition into a dispute for the private sector.
Whilst inflation and the forecasted ‘summer of discontent’ will be a headache for CEOs across the world, the pandemic highlighted that companies, if managed correctly can use these ongoing issues to strengthen company loyalty from their staff and reinforce their position in the market.
Here are three top tips to best combat wage inflation.
1. Track data on wage trends
Whilst businesses alone cannot change the market landscape, the decisions that they take now could determine whether they make it out the other side of these challenging times.
CEOs should always be aware of market forces and factors that influence their workforce. By monitoring indices such as the Employment Cost Index, unemployment rate and food prices, leaders can forecast wage pressure and gauge the correct compensation. CEOs need to balance short-term margins and profit with trying to attract and retain talented employees. It’s a fine balance.
During the pandemic, we have seen that if workers aren’t satisfied in their current roles, they will just leave – the Great Resignation being case and point. Given this, companies need to be proactive and install strategies that address the issues before they are raised by staff. In doing so they build trust within their workforce, making them more likely to retain talent and build a strong company culture.
2. Improve wellbeing and benefits packages
Whilst a one-off cost of living pay rise is likely to be well received by employees, it won’t necessarily guarantee loyalty. Following the pandemic, employees are now focused on their overall experience and their work-life balance. A company’s culture and its benefits offering have never been more important.
One of the most prominent effects of the pandemic was the rapid acceleration of flexible working. Almost overnight many of the pre-pandemic ways of working became outdated (or impossible). Businesses that flourished during the pandemic were able to respond rapidly and adapt their employee engagement strategies accordingly, all while maintaining workplace satisfaction and continuing to grow.
This tailored, flexible playbook which guaranteed success during the pandemic, needs to be used to deal with inflation. Offering hybrid or remote working can help combat the rising cost of living, as it enables employees to have more control over their finances. By allowing staff to work from home, employees aren’t subject to expensive commutes or purchasing expensive lunches out of the office.
If organisations want to win the war for talent, they need to offer a benefits package that is more complete than a just competitive salary – following the pandemic it is what workers want and expect from a company.
3. Investing in and upskilling existing staff
While raising wages is a quick way to attract recruits, it isn’t sustainable in the long-term. A more holistic approach is better suited. Employees don’t just want instant financial relief (particularly given that this inflation will likely continue to rise) they want to see career progression which guarantees long-term financial security.
By allowing existing employees to upskill in line with the business’s needs, they are not only empowering employees to grow their role (great for retaining and attracting talent) but it is also far more economical than hiring new talent in a competitive market.
In the 1970’s Britain was dogged by an inflation/wage spiral. If businesses want to avoid this they need to get creative. Whilst a wage increase may seem like the logical solution for businesses to stay afloat and satisfy workers, this only offers short-term success. Business leaders need to champion alternative methods if they want to retain top talent and upkeep workforce confidence.
About the author: Neil Debenham is CEO of Fintrex.