Inflation: The #1 Killer of Human Resources
Perhaps you’ve heard many talking (or rather, complaining) about this pesky global issue: inflation. But what they may have failed to mention is how fatal this issue can be to businesses - its stealthy, silent approach culminating into a slow and steady death. In fact, it’s so fatal that it may be what makes or breaks your business in the future years to come!
Thus, welcome to Part 2 of our World Population Week special: we’re going to find out why inflation is now potentially the top killer of human resources and how your business can survive its deadly reach!
Effects of Inflation on Human Resources
Inflation is a term in economics given to the rise in prices for goods and services as well as a reduction in the purchasing power of your money. In summary: you need more money to buy things.
In terms of direct consequences, this means that employers have to tighten their budgets and increase their employees’ salaries. If they’re unable to meet these demands, they put their business at risk of being unable to keep their current employees - in other words, increasing employee resignations - and to recruit new employees prioritising fair pay.
On top of that, employers may need to provide more benefits as incentives or due compensation for daily employee workload. Some are already having to revise their benefits packages and other resources. They may also have to comply with and make arrangements for remote working (WFH), as some employees are unable to afford the daily costs of commuting or travelling to the workplace on-site.
Thus, in comparison to businesses who are able to provide these, they have an advantageous edge. This makes it more likely that employees will flock to these businesses as their employer of choice, narrowing the talent pools other businesses need to thrive and continue functioning.
How Human Resources Can Manage Inflation
Fortunately, there are ways to combat inflation that start right at a business’s human resources department. A major responsibility of these departments is to monitor the competitive labour market and observe what salary trends and employment opportunities are taking place.
By taking note of these, it’s possible to avoid certain pitfalls - especially when it comes to inflation - by just staying updated, taking note, and adapting to new changes wherever possible.
Another crucial method is to get creative with the rewards and bonuses you give to employees. You can increase the flexibility of pay by granting compensation and benefit allowances, which will provide for daily work aspects for employees, such as transportation, meals, and remote working.
Target rewards (off-cycle pay increases) are also used more commonly than annual or merit increases in recent years. They can be implemented more quickly, easily tied to employee needs or their performance, are not permanent, and will not draw on any future planned company budgets.
And most importantly: be transparent with your employees. Especially with employees struggling to find jobs, transparency is one of the most important aspects of an employer.
They do not want to be scammed into a job or have their time wasted if they are not going to be considered. They would also like as much information about the position they’re applying for as possible so they can thoroughly review whether they would be willing to take on and perform well in the role.
And this includes details such as salary. Thus, it is highly beneficial to utilise transparency as a key selling point in your strategic workforce planning. By controlling the public narrative by being honest, you can convince your target audience to understand the way your company engages with employees, which will prove advantageous in the long run.
Why Is This Important?
There’s a fine balance to be maintained between whether the employer wants to pay more than necessary for talents and positions and whether the employee is satisfied with their salary enough to be motivated in their work. When inflation is involved, it affects salary decisions from all aspects as well as reflects the growth of wages in the job market overall.
According to Hays’s Salary Guide last year, 88% of businesses surveyed already had to increase their salaries to keep in line with market demands. However, only 51% of those businesses will increase them by less than 3%. You can view the stark difference in the expectations of salary increase below:
Additionally, with how inflation has been progressing unchecked recently, employees’ funds for retirement will become harder to achieve and maintain. There’s also an increasing number of professionals in the job market, most - if not all - of whom want higher salary rates than their non-professional peers. Certain jobs are even facing skills-shortage and have no choice but to offer a higher salary to employees due to scarcity.
This makes it all the more important for the HR departments of businesses to be informed about their organisation’s compensation policies and budgets, which affects their purchasing power of materials and overall employee morale. Failing to adjust salaries in line with the rising standard of living also means failing to attract or retain prospective employees willing to work for your company and failing to keep up with the current competition.
That’s why, at Hyred, we understand the value of granting our human talent the benefits and wages we know they deserve. We’re always seeking a diverse range of talented, passionate people who believe in helping others achieve their career goals fairly too.
If you’re interested in onboarding with us, visit our Homepage now to set up a free 30-minute consultation for more information! Or visit our Payroll page to find out how we can help you with your business’s finances!
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