For many Total Rewards professionals, inflation has grown from an obligatory data point that you would insert in your annual compensation processes planning deck to the focus of programming (maybe even an internal task force) requiring monthly updates to the HR Leadership Team or Corporate Management Team. With these audiences, it’s always important to manage expectations and clarify what should be acted upon immediately and what should be monitored and revisited over time.

What should you do NOW

In our latest Real Time Insights Survey: Navigating Uncertainty, 92% of respondents indicated having at least one job family with greater than normal turnover. If you are in this majority, analyze the problem to determine if the gap is concentrated in a function or location, develop the profile(s) of employees exiting, and consider the voice of the current and exiting employees to determine the root cause of the exodus. Proven techniques include digital focus groups and unmet needs analysis. Join the 42% of respondents that are conducting off-cycle pay reviews for key populations, leveraging the best and more current market data, including the ability to add a skills lens to the benchmarking

Once the internal and external research and analysis has been conducted, consider taking targeted and thoughtful action

 

If pay levels for critical roles are not competitive, consider targeted market adjustments now (14% of survey responses are doing so). Some companies may be able to fund these increases with cost savings associated from reduced hiring or increased scrutiny on new hires. 25% respondents indicate they are hiring only for critical roles. 21% of respondents indicate additional levels of internal review will be required on new hires going forward.

 

When at-risk employees are identified, and they are deemed critical, retention payments may be in order.  32% of survey respondents are currently considering retention bonuses. These payments may be designed to support key roles or to retain specific critical skills.

 

Inflation impacts each employee differently, consider flexing your benefits program to help reduce the increased pressures on employee financial wellness. This may include promoting financial guidance counselling, voluntary benefits, discount programs, or lifestyle spending accounts; all of which the employee can choose benefits that they value most. 16% of participants are considering new benefit offerings.

What should you do LATER

Only 19% indicate that inflation has not been considered in annual compensation planning budget process.  Because inflation rates will ebb and flow from now until your annual compensation processes in December through March , it doesn’t make sense to finalize your compensation planning approach and corresponding budget today.  Even for the aforementioned 19%, the inflation rates at the time of leader decisions and at the time of employee communication will play a significant role in your 2023 messaging. 
 

All reward teams should monitor economic indicators such as inflation, job growth, and unemployment.  Leading teams are scenario planning to decrease the probability of a surprise come Q1.  Dynamic scenario planning may include a combination of enhanced increase budgets, lump sum utilization, segmented skill investment strategies, and the deployment of multiple increases in a calendar year. 

 

We acknowledge that you may not have the option of a flexible budget, but we do encourage you to be flexible in your planning as you consider how to address inflation throughout the rest of the year and into next.
 

One strategy that should be employed both now and later, and it doesn’t require a budget request, is effective communications.  44% of respondents are increasing efforts to communicate the full value of total rewards in light of reported labor shortages being exacerbated by the great resignation and employee challenges associated with record high inflation. Messaging now, that can be reinforced during the annual compensation planning process can provide the steady and consistent direction your employees, leaders, and executives value.

Brian Fisher
By Brian Fisher

Global Skills & Career Frameworks

Elissa Rosenbaum
By Elissa Rosenbaum

Total Health Management Senior Consultant, Mercer

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