Economic inflation isn’t just an external news story – it’s a painful market condition that affects nearly everyone. It can have a wide-ranging negative impact on your workforce and, ultimately, your business.
How so? Inflation can:
- Diminish the reach of employees’ salaries, making them feel as though they don’t earn as much as they used to
- Affect aspects of their lives as consumers with the rising costs of everything from groceries to fuel to vacations
- Reduce the amount that employees are able to contribute to their 401(k)s, which can result in significant long-term impacts, including delays in plans to retire as expected
- Increase stress and anxiety levels in employees, which can:
- Distract them from work
- Cause productivity to plunge
- Force employees to take second jobs, which can cause burnout and exhaustion
- Lead employees to leave your company for higher pay elsewhere to counteract the effects of inflation
Communicate with employees about inflation: Yes or no?
Although no company is ever obligated to discuss topics that aren’t specific to the organization, be aware that your employees, especially younger workers (Millennials and Generation Z), may expect you to acknowledge issues that personally impact them both inside and outside the workplace.
In the post-COVID workplace, employees tend to have much higher expectations of their employers, including the frequency and breadth of communications. Therefore, understand the needs and expectations of your workforce.
To maintain strong employee relationships and avoid getting caught off guard, inflation is one of those current events for which you should consider preparing a communication plan. With your workforce, as a general rule it always pays to get ahead of certain issues and be:
- Connected
- Communicative
- Empathetic
- Transparent
Let employees know that you’re aware of their struggles during this challenging time, that you care and that you want to support them. As a result, they are more likely to feel heard and valued, and they are less likely to take any drastic, stress-induced actions.
How to support employees during economic inflation
With that being said, how can you demonstrate your care and support for employees?
1. Promote your employee assistance program (EAP)
Your company’s EAP exists to help employees with a variety of both work and home-life topics by opening up efficient, confidential access to professional resources. Leverage it!
With inflation, your EAP can connect employees to financial professionals in order to become more financially stable and learn how to manage the impact of inflation on their income and household budget.
Additionally, employees dealing with inflation-induced stress and anxiety can find mental health professionals via the EAP.
When you communicate with employees about inflation, remind them of your EAP’s availability and diversity in services, as well as how they can access it.
2. Engage top-priority employees
During times of inflation, it’s a valid concern that employees may leave your company in search of higher pay or better benefits. This is especially true when it comes to talent that you can’t afford to lose.
It can be a smart exercise to identify the most mission-critical talent in your workforce and proactively start discussions with them. Conduct stay interviews with these employees to:
- Find out what they like about your company
- Ask if there are any changes they recommend or concerns they have
- Inquire about what they need that they’re not currently getting
- Get an idea of which scenario(s) would make them more likely to leave
Also train managers to have regular conversations with their direct reports about what keeps them at the company and what might make them consider leaving. Inform managers on what they should look out for that could indicate an employee preparing to leave – for example, a sudden change in behavior or increase in absenteeism.
3. Support managers
Your managers really are the glue that holds everything together in your workplace. But they’re not immune to their own personal distractions and life stressors as well, particularly those resulting from widespread events such as economic inflation.
That’s why you should put extra effort in supporting managers. Educate them on how to deal with unfocused, anxious employees by:
- Offering more training on coaching employees through inflation-induced stress or resolving conflict, including role playing certain scenarios
- Guiding them on how to conduct stay interviews
- Freeing up space on their calendars so they can schedule regular one-on-one meetings with direct reports and keep a better pulse on what’s going on with employees
- Advising them on the behavioral cues, tone and body language to look for when evaluating whether an employee is struggling more than others or might be at risk of leaving the company
4. Increase company contributions to retirement planning
A 401(k) retirement plan is an important benefit that your company pays to provide for employees – and you want to make sure that they know how to take full advantage of it for their financial well-being and future security.
When communicating with employees about inflation, remind them of the long-term benefits of contributing to their retirement plans. Urge them to not give up on their investments or their retirement dreams.
If budget allows, consider upping the amount that you contribute or match to your employees’ plans each month to help ease their stress.
5. Explore other financial incentives
Of course, there’s always the option of raising salaries commensurate with inflation. This would be a popular option with employees.
However, from employers’ perspective, the cost of living doesn’t necessarily equate with the cost of labor – and it’s the latter that determines salaries. Furthermore, many employers have spent much of the recent Great Resignation raising salaries to attract and retain top talent in a super-competitive job market – and many are now stretched thin.
Even during times of inflation, companies cannot become so desperate to retain employees that they overextend themselves and lose sight of their own financial viability.
If increases to base pay aren’t possible, there are alternative approaches that still have the potential to help employees earn more money and ease financial stress without impacting companies’ regular fixed costs. These options revolve around bonus programs and can include:
- Performance bonuses – Focused on an employee achieving a specific goal or objective, or demonstrating a desired behavior in the workplace
- Retention bonuses – Used to retain employees during transition periods to encourage them to stay
- Sign-on bonuses – Given upon hire and not based on performance
- Spot bonuses – Immediate (on-the-spot) recognition for outstanding contributions of individuals or teams
In addition to reducing employers’ financial risk, bonuses act as a powerful incentive for employees to maintain strong performance despite personal distractions.
If you do enact any pay changes, be mindful of internal pay equity. Document all reasons for pay changes in writing.
6. Seek out other incentives as well
In times of stress, employees tend to fixate on base pay. But there is a larger picture. Often, companies are able to offer benefits to employees that, while not costly to the bottom line, deliver value to employees personally while increasing their engagement.
Examples:
Training and development has the added benefit of making employees more valuable to their employer as well.
7. Allow employees to work from home (if you don’t already)
Still have grand return-to-work plans following the COVID-19 pandemic? Inflation may put a damper on those. With high costs of work-related expenses – for example, gasoline for commuting, eating lunches out, happy hours, dry cleaning professional attire and childcare – many employees in roles that are conducive to remote work may resist coming into the office. From their perspective, why spend all that money if it’s unnecessary?
Depending on your business and specific roles, an easy way to mitigate employees’ costs is to allow them to work:
- From home 100%
- On a hybrid schedule
- On a flexible schedule, such a shortened work week, to reduce days in the office
This will also align your business with the latest workplace trends and employee expectations, and help you to avoid dreaded post-pandemic turnover. These days, it’s not just a better salary that motivates employees to make a move. Most employees really want more workplace flexibility and will change jobs to attain it.
For employers, this has the added financial benefit of reducing company overhead.
Summing it all up
Economic inflation isn’t an issue that employees leave in the outside world when they walk through your office door – it’s a major issue that can cause employees significant amounts of stress and anxiety. In this way, it very much infiltrates your workplace and can have many negative impacts. Here, we outlined seven tips that employers can put into practice to demonstrate their care and support for employees during inflation and, hopefully, re-engage and retain employees, calm concerns, shift employees’ focus back to work and maintain productivity.
For more information on helping employees navigate tumultuous periods, download our free magazine: The Insperity guide to managing change.