The holiday season is upon us. This time of year brings a lot of meaningful moments, but it also means extra spending. The fact that everyone is feeling the strain of inflation makes this time just slightly less merry. Paychecks are being stretched even thinner just to ensure essentials like gas, food, and housing are covered, and it seems like this will continue into the new year.
The US inflation rate is 7.7% (as of October 2022) after rising 8.2% previously, according to U.S. Labor Department data. To off-set these rising costs, employees depend on their pay being adjusted annually for cost of living. A modest increase in cost year to year is expected, but with extreme inflation, the gap between salary and cost of living is untenable. Average hourly earnings increased by 5.2 percent between May, 2021 – May, 2022, while the average price of consumer goods rose by 8.6 percent. That disparity with no end in sight plus the holidays looming? It’s easy to understand why employees would brush up their resumes and scan through the job postings – searching for terms like ‘signing bonus’ or ‘competitive salary.’
And employees aren’t the only ones feeling the inflation strain and subsequent demand for higher wages. Employers are experiencing pay compression with new hires, where the salary of a newer employee is the same or close to the salary of more experienced employees. Not good for office culture or for the bottom line.
Rather than try and raise salaries to meet the height of inflation, and then remain locked into those higher rates when things settle down again, it behooves employers to find creative compensation solutions to meet employer and employee needs while keeping good employees from leaving for more money.
A compensation package that includes a vesting cash bonus from Keep can offset current market conditions for employees and employers alike.
For employees, access to a lump sum of cash can help with large purchases or savings (think: down payment, paying off debt, saving for retirement or college, investing), but also with the everyday costs that are higher right now. Having cash up front, in addition to the stability of a regular paycheck gives employees a bigger cushion and reduces their financial stress. Less stressed employees are happier and more productive employees.
For employers, including a vesting cash bonus for new hires helps companies offer the kind of money that will attract top talent and simultaneously avoid pay compression by keeping base salaries closer to market rate overall. Even better, keep your current employees from seeking higher salaries by instituting an innovative vesting cash plan that rewards hard work and incentivizes long-term loyalty. Gallup recently reported that if you can engage and retain existing employees, your company and your team will enjoy several benefits including 20% higher productivity and 45% less turnover.
Hopefully there is relief from this inflation coming in the months ahead. In the meantime, employers can help combat inflation’s effects for their employees and themselves by seeking innovative compensation solutions through Keep.