The Great Resignation, also known as The Great Reassessment, is about to lap itself. Despite the fact that the unemployment rate has risen in recent months, employers across all industries are still having difficulty filling open positions, giving employees more power than ever. With inflation at a four-decade high, it’s no surprise that they’re demanding higher pay or leaving their jobs in search of greener pastures to keep up with rising prices.
Many employers are assuming that they need to raise compensation, particularly among lower-wage earners, not only to attract new talent but also to keep needed workers from fleeing for better pay elsewhere, as a result of this perfect economic storm. Concerns about wage increases are being discussed at both the executive and board levels. Some executives who believed that last spring’s trends were only temporary are now scrambling to respond. Meanwhile, public-facing industries such as hotels, restaurants, theme parks, and airlines are experiencing a surge in customer demand. Logistics firms are having difficulty transporting goods from ships to ports and from ports to stores.
As a result, prices are rising, fueling demands for higher pay. In other words, it’s a never-ending cycle.
There are a variety of reasons to consider wage increases right now, including lowering turnover, reducing operational disruptions, and improving employee value proposition. A major consideration is avoiding reputational damage. For example, despite charging record prices, Disney World was recently chastised on social media for not providing maid service at its hotels. Domino’s, the original pizza delivery company, has taken a more proactive stance, offering customers a three-dollar “tip” if they pick up their orders themselves.
Even before Covid, the federal minimum wage of $7.25/hour was losing relevance in many industries as fast-growing companies such as Amazon raised their minimum pay rates into the low teens. A common starting wage in large corporations is now $15 per hour. Smaller businesses, on the other hand, are concerned that wage increases will be difficult to reverse, and that not every company can afford to raise minimum pay that high to begin with. Last quarter, Amazon’s e-commerce business lost money, but the e-commerce and cloud giant can afford to wait until the labor situation improves or prices rise enough to offset its increased labor costs. Others aren’t so fortunate.
So, should you raise your wages right now or wait until later? We propose two methods for increasing pay in a strategic manner. Both entail taking a broad view of the situation.
Play a role
When faced with labor shortages and rising labor costs, examine how the company completes tasks, who performs the tasks, and how each role affects company performance. There may be opportunities to consolidate or expand roles, redefine responsibilities, or use third parties.
Use your imagination
Health and retirement benefits paid time off, flexibility, bonus opportunities, career development, and other non-cash perks are all part of the employee value proposition. There may be improvements to be made in other aspects of the value proposition that are less expensive but have the same impact as sweeping pay increases, such as providing healthcare at a low or no cost.
In the end, making more strategic decisions about pay increases rather than simply increasing pay across the board will undoubtedly benefit both employers and employees.
Learn more from business and read Train Online: Ten Best Practices to Help Your Employees.