Although the Bank of England insists inflation will fall quickly in 2023, we are now halfway through the year with little sign of this happening. In fact, annual inflation has been stuck at 8.7% for two months, whilst core inflation (which excludes food and energy prices) rose to 7.1% (the highest level since 1992) in the 12 months leading up to May.
Worryingly, most salaries have not changed to account for these figures, with the latest statistics showing that growth in total pay has fallen by 2.0% in the last few months.
So, is it any wonder so many employees are feeling deflated right now? And we all know what happens when staff are unhappy: they look for new jobs.
Paying staff more is one way to prevent wandering eyes and secure top talent in today’s tricky recruitment and retention landscape. However, there is a lot to think about before handing out higher salaries, and it is not your only option. Providing more generous workplace benefits can also help to boost satisfaction for current staff members and entice new candidates.
But how do you strike the right balance between salaries and workplace benefits?
Offering pay rises
Paying staff higher salaries might seem like an easy way to keep staff happy and avoid recruitment and retention issues whilst inflation is high. After all, 83% of workers surveyed by the ADP Research Institute in the People at Work 2023: A Global Workforce View survey said they expected a pay rise this year.
However, it is not always as simple as raising wages by a few percentage points.
Although issuing blanket pay rises can allow you to bring base salaries up in line with inflation, hard-working employees might think it is unfair to receive the same raise as less committed staff — and lose the motivation to give 100%.
As such, performance-based pay rises can be a fairer and more effective way to satisfy staff in tough economic times. With this approach, you can base wages on each person’s market value, considering how much their skills and qualifications are worth to your organisation, or raise salaries based on factors like output and quality of work.
When reviewing salaries for both current and potential employees, it is also important to benchmark them against industry standards. With salary benchmarking, you can work out how much your competitors are paying staff and decide what you need to offer to beat or at least match them — ensuring staff and candidates do not get tempted by better offers elsewhere.
Introducing new perks
Workplace benefits are an excellent way to compensate staff for their work (and improve employee satisfaction) through free or discounted access to products, facilities and services they would usually spend their salary on.
Take gym memberships as an example. When signing up multiple employees at once, businesses can usually secure memberships for a discounted price. These memberships can help teams be more active and improve their physical and mental well-being at a relatively low cost, which is great for improving recruitment and retention whilst inflation persists.
Other examples of workplace benefits include fuel payback schemes, public transport reimbursements and staff childcare cost contributions.
Because workplace benefits schemes can be tailored to your staff, they can be more effective than blanket salary rises and work well as an ‘added bonus’ on top of basic salaries. Nevertheless, these perks do not substitute fair wages that align with industry averages and account for market activity — crucial for any business wanting to avoid losing staff or candidates as inflation persists.
Therefore, any company deciding how to bring employee compensation packages up to date should strive towards achieving a balance between salaries and workplace benefits. This two-pronged approach can help to ensure basic staff needs are met and employees are appropriately rewarded for their work.
It is also a good idea for organisations to seek help from a recruitment specialist when taking on this task. Recruitment experts can offer advice on salary benchmarking and expected workplace benefits thanks to vast knowledge of different industries and roles.
Howett Thorpe is a recruitment specialist offering services in business support and finance. To learn how we can help you master recruitment and retention at your organisation, call 01252 718777 or email email@example.com.