More than 40% of companies say workers have asked for a pay rise to compensate for inflation. Few have revised their salary budget.

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IInflation may have hit new highs in 40 years, but less than a quarter of U.S. organizations say they revise their salary budgets because of inflation, despite many workers asking for raises or other measures to deal with rising prices, according to a new survey.

Mercer, the human resources consulting firm, surveyed more than 300 U.S. employers in March and found that 45% did not factor inflation into salary budgets. Less than 25% say they are making changes to their salary budgets due to inflation, but 42% say workers have asked them to take financial action to deal with rising costs.

Yet the survey found that nearly half of organizations say they will make additional pay reviews for some or all of their employees in response, a sign that some may be increasingly worried about losing jobs. workers if they do not act. 77% said dissatisfaction with pay or being offered a higher salary at another company was the main reason they saw turnover in their ranks.

“Organizations are cautious about establishing a practice of paying primarily on the cost of living, as opposed to the cost of labor,” said Tauseef Rahman, partner at Mercer, in an email regarding new survey data. He was referring to how many employers make compensation decisions, determining what people with certain job titles in specific regions are typically paid.

He’s not surprised by the disconnect between what employees are asking for and what employers have done so far in response. As Rahman puts it, “The concern is that organizations can create the expectation that salary is based entirely on cost of living, not labor cost which has more to do with talent availability and demand. “. One challenge, he says, is that employers “may not have been clear with applicants and employees about… [how] the salary was being fixed.

At the same time, Mercer’s survey also reveals that 50% of organizations say they pay more than the market rate because of difficulties they face finding and retaining employees, and 41% say they have some kind of retention bonus.

Meanwhile, 60% of respondents said they saw an increase in the number of counter offers candidates receive, and about 30% say they beat or match the counter offers.

Josh Bersin, a human resources industry analyst, says he hears companies say inflation is having an impact. “Everyone I talk to goes through this reassessment, saying ‘you know what, we need to add more money. We need to redefine wages more often to adjust,” he says.

“There’s a saturation point – you can’t compete on salary alone,” Bersin says. “But we’re on point right now [of people saying] “I won’t work for you unless you can pay me more money.” So there’s this staircase process going on, [where] everyone increases their salary little by little.

“There’s this staircase process going on, [where] everyone increases their salary little by little.

—Josh Bersin, human resources sector analyst

Bersin thinks the Department of Labor data may be lagging a bit on what’s happening in employers’ payrolls. Consumer prices rose 7.9% in the 12 months to February, according to data released by the Department of Labor last week. At the end of the fourth quarter of 2021, the U.S. Employment Cost Index showed compensation costs for civilian workers rose 1% for the three-month period ending December 2021, with wages and salaries rising increased by 4.5% last year.

Although this is a two-decade high, Bersin thinks “wages are probably growing faster than the federal government thinks,” he says. A human resources manager he recently spoke to told him “we’ll post a job on Monday, they’ll take the job on Thursday… [and] they don’t show up. Over the weekend, they got a job for 50 cents more an hour. It’s just that fast.

Some companies find other ways to provide more compensation to people. For example, Jonathan Johnson, CEO of Overstock.com, said his company issued stock to a broader group of employees. The company’s research shows it is above the national average for compensation in markets where it competes for talent, Johnson said.

“You can’t spend your capital at the gas station, but it can help you build wealth and maybe save money,” he says. The company also did not increase what employees pay for medical and dental insurance premiums this year.

Rahman says when companies offer raises due to inflation, they’re usually “targeted adjustments” based on things like wage competitiveness, an individual’s performance, or the needs of the organization. business. Just as “inflation is complex and not a single number for everyone, wage adjustments are just as complex”.

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