Inflation is everywhere—from our social media feeds to online articles to cable news programs—everyone is talking about inflation right now. The Consumer Price Index (CPI) – the best-known indicator of inflation which tracks the cost of living over time, rose 8.3% in the 12 months ending in April 2022. These numbers have many economists drawing comparisons to the inflationary environment of the 1970s and early 1980s—a time dubbed “The Great Inflation”.
Today’s inflationary environment hurts the purchasing power of all nonprofit and for-profit employees alike. Unfortunately, the resulting financial stress can negatively impact employees’ job performance. In fact, a recent survey by Morgan Stanley demonstrated 64% of employees agreed that financial stress negatively impacts both their work life, as well as their personal life. Moreover, the same survey reported 8 out of every 10 of human resource executives worry that financial stress outside of work affects their employees’ level of productivity at the office.
This financial strain combined with today’s tight job market is placing a bigger onus than ever on employers to do everything they can to support their employees, reduce their stress, and maintain their productivity during this difficult inflation period.
How Employers Can Help Employees Weather Inflationary Pressure
Based on our extensive experience helping clients weather many different economic climates, we’ve identified several ways employers can help their employees manage the impact inflation is having on their lives.
Give Employees More Autonomy and Flexibility
Amidst the current environment of higher inflation, one of the best ways employers can help ease the inflationary burden is by offering employees more autonomy and flexibility. Many employers are putting in place flexible hybrid workplace models or even more autonomous models that allow employees to work wherever and whenever they choose. Increased autonomy is a way that employers can help employees when salary raises to keep up with inflation aren’t tenable.
Employees, in turn, can exercise this autonomy in different ways to try to quell the stress of inflation in their lives. For example, by having the flexibility to work from home, employees save money on commuting costs and costs associated with coming into the office (lunches, coffee, etc.). Additionally, employee autonomy also gives time back to employees which they can use for activities such as reducing daycare needs and exercising more to improve their health.
Reverse the Trend of Passing Inflated Costs on to Employees
One of the harsh realities about inflation is that it not only erodes employee purchasing power, but it also increases the expenses of the employer. One of the foremost examples of this increase is healthcare costs.
Healthcare costs were already increasing as the result of labor shortages and supply chain problems. Now, with rising inflation, healthcare costs will only increase further, which leaves employers facing with the decision of whether to pass on these cost increases to their employees.
Big four accounting firm KPMG made headlines with their approach to addressing rising healthcare costs. KPMG employees were dissatisfied with the increasing health insurance premiums they were paying. In response, KPMG elected to reduce employee healthcare premiums by 10%, while keeping their healthcare coverages the same. KPMG stepped in and paid for the difference. This resulted in a tremendously positive response from employees.
Offer Retention Bonuses and Work-From-Home Stipends
As companies are having to shoulder increased costs due to inflation, they may not be in a financial position to raise the base pay of their employees. As an alternative, employers can offer their employees bonuses as a form of monetary compensation to help them during through the difficult inflation environment.
One type of bonus that employers can utilize to help relieve inflationary pressure is a retention bonus. A retention bonus is contingent on the employee staying with the company for a defined period of time. The advantage of a retention bonus is that you not only help your employees with inflation, but you also lower your employee turnover rate in the process.
In addition to bonuses, employers can also utilize stipends to help their employees with inflation pressures. Stipends are designated for specific purposes such as work-from-home stipends for purchasing home office supplies or subsidizing a portion of the employee’s home utility bills. These annual or bi-annual work-from-home stipends help offset some of the pressures placed on employees from high inflation.
Provide Employees with Financial Education and Planning Resources
A study conducted jointly by SHRM and Morgan Stanley found that only 35% of companies offer financial planning to employees. Furthermore, only 24% of companies offer any form of financial coaching or education to employees.
What’s striking is that the same study also found that 60% of employees desire help with their financial planning and 54% would like to receive some form of financial coaching. This data suggests that there is a significant missed opportunity for employers to tangibly help their employees at a time when they need it more than ever because of the negative impact inflation is having on their daily lives.
Employers who provide financial education and planning resources to their employees can help curb the negative effects of inflation in a variety of ways. For example, a financial planner might make employees aware that the U.S. government is currently offering inflation-adjusted bonds that pay 9.62% inflation-adjusted interest. This is just one tool of many that can help employees remain financially healthy during times of high inflation.
Goldin Group CPAs Helps You Navigate the Headwinds of Inflation
If your organization is feeling the headwinds of inflation resulting in rising costs and employee dissatisfaction, we’re here to help. Reach out to the experts at Goldin Group CPAs today by contacting Ariel Goldin, CPA, Director of Client Relations at email@example.com.