Almost every country has faced inflation spikes in the past few months to a year, including in India, where the central bank has reported a 14-month-high retail inflation of 6.21% this month. But what does inflation mean for HR professionals? More specifically, how does it impact your company’s efforts to find, hire, and retain the best talent?
Let’s talk about inflation and what it means for HR teams in India and beyond. Look ahead for tips, strategies, and solutions for keeping your workforce happy during times of rising costs.
What is inflation and why should HR care?
Simply put, inflation means prices of services and goods (everything from fuel to vegetables) are going up. When you hear about a 6.21% inflation rate, it means things cost about 6.21% more than they did a year ago.
Those in HR departments should care about inflation, and for a good reason. It isn’t just a matter of rising prices and costs of living. It can have a two-prong effect on employees, especially when prices go up but salaries stay the same. After all, workers can buy less with their paycheck than before.
Think about it this way: if an employee earned ₹50,000 a month last year and received no raise, their salary today can’t stretch as far as last year. This affects everything, from what you pay for vegetables to whether you can afford your rent.
The current inflation status
The current inflation situation in India isn’t rosy. The latest data shows retail inflation, as tracked with Consumer Price Index (CPI), has hit a 14-month high of 6.21% (Reuters), exceeding what the Reserve Bank of India considers acceptable. Food prices have borne the biggest brunt at 10.9%, with vegetable costs rising by over 42%. This means whatever you pay your employees isn’t stretching as far as they used to.
India is not alone in this; the US recently saw their inflation reach 8.5%. Other major economies like the UK are still recovering from 40-year high numbers thanks to a recent 4.75% rate cut by the Bank of England. Of course, we are not even talking about perennial inflation-prone countries like Argentina, Venezuela, and Zimbabwe.
How it affects your company: What does inflation mean for retaining and hiring the best employees?
It so happens that inflation conditions leave only a few companies unaffected, but not many of those with international operations or competing for talent in the global market.
When inflation rises, it creates two main pain points for HR. First, your current employees might start looking elsewhere if their salaries don’t keep up with rising costs. Second, attracting new talent becomes harder because candidates are looking for higher starting salaries to match the increased cost of living.
What can HR teams do about inflation to attract, retain, and hire the best talents?
Making your bonuses work harder
Smart companies put bonuses to good use during times of high inflation, especially when your bottom line isn’t affected in the meantime. Bonuses serve as temporary plugs for gaps between rising costs of living and stagnant pay raises, without creating a future cost (unlike giving out more retirement benefits or stock options). Striking a good balance between pay raises and bonuses can do wonders for retaining and hiring the best employees.
It pays for HR teams to get some inspiration on how other industries use bonuses to attract, reward, and incentivize. A perfect example is to think of how telecoms like Bharti Airtel and Vodafone Idea use switch and sign-up bonuses to increase their subscriber bases. The same goes for how gaming and casino sites use welcome bonuses and incentives like free spins and deposit matches to attract new sign-ups and retain existing customers, as put well by this website.
There are plenty of ways to look at bonuses and leverage their power during times of high inflation. If you can borrow a leaf from the playbook of telecoms, gaming, and airlines, creating an employee referral program is as good a start as any place. But don’t stop there – try offering profit-sharing arrangements, better commissions, base pay bonus, company shares, or even more paid leave days.
Smart use of salary increases
You might not be able to match inflation with raises across the board. That is the reality for almost every Indian company and many others the world over. You can be more strategic about pay increases. Think of key positions and high performers first. Even if you can’t match inflation down to the tee, showing that you’re aware of the issue and taking steps to address it can go a long way in keeping employees happy.
Improving benefits that matter
When you can’t compete solely on salary, benefits become even more important. Good health benefits like dental become even more valuable when people are watching their spending. Another area to do a sweep-through is across your employee retirement benefits: Help them build long-term financial security through matching contributions and financial planning help. Working from home can help employees save on commuting costs and better manage their time.
Building a stronger company culture
Money isn’t everything. Creating a positive work environment where people feel valued and see opportunities for growth can help keep them around even if you can’t offer the highest salary in the market. This includes clear career paths, regular recognition, and opportunities for skill development.
Wrapping up: Making it all work
It pays to be transparent with your employees about what you’re doing to help them deal with inflation. Regular communication about compensation strategies, benefit updates, and growth opportunities helps employees understand that you’re aware of their challenges and working to address them.
Remember, you don’t have to solve everything at once. Start with what you can do now, whether that’s adjusting some salaries, adding new benefits, or improving your bonus structure. The important thing is to take action and keep your employees informed about your efforts.
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