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Inflation can negatively impact employees’ disposable income, quality of life, and a company’s profitability. One way to address this issue without increasing wages is to offer creative bonuses or benefits. Here are 20 ideas for rewards and benefits that may help alleviate the effects of inflation on your workforce.

Inflations Impact on the economy: A quick history

Inflation has had a significant impact on the economy throughout history. When inflation is not controlled, it can lead to a decline in the buying power of workers, particularly those who are paid lower wages.

Inflation can also have negative consequences on a national level. For example, Germany’s obligation to pay war reparations after World War I led to a high amount of printed money. This resulted in hyperinflation and the devaluation of the German Mark on foreign markets. This had severe consequences, including the need for Germans to use a wheelbarrow full of money to buy a single loaf of bread.

Inflation significantly impacted the economy, such as in the 1978-1982 period when it reached double digits. In 1980, it peaked at 14.8%, leading to a prolonged period of economic discomfort known as stagflation. An increase in the money supply and limited consumer goods caused this. If left unchecked, inflation can persist and lead to further increases in consumer prices, resulting in higher employee compensation and the potential for hyperinflation or other economic issues.

While some experts have brushed off recent warnings about inflation and called it a temporary trend, others have pointed to rising energy prices and the highest inflation rates since 1982 as causes for concern.

The Perfect Storm

It can be challenging for economists to accurately predict inflation, especially when faced with unforeseen events like the COVID-19 pandemic. The pandemic and related mitigation strategies, such as lockdowns, have significantly impacted the production of goods and services, which can contribute to inflation.

In 2020 and early 2021, consumer demand increased significantly as people stayed at home due to the pandemic, potentially fueled by stimulus checks provided by the government. However, as production decreased, fewer goods were available, leading to higher prices for food, gas, vehicles, and other commodities.

This resulted in a classic case of inflation caused by low supply and high demand. Additionally, the combination of baby boomer retirements and increased resignations caused labor shortages, leading to competition for talent and higher labor costs for products. Inflation is most likely to continue for the foreseeable future.

How much is inflation impacting your employees’ purchasing power?

Purchasing power refers to the number of goods or services bought with a given amount. When prices rise, and incomes remain unchanged, consumers may feel they have less purchasing power because they cannot buy as much with their money. This recent data from the Bureau of Labor Statistics show that the consumer price index increased by 8.5% over the past year, with some items such as poultry, beef, fish, and eggs experiencing an even more significant increase of 13%. Prices for apparel, food at restaurants, and gasoline have also increased by 5%, 7.6%, and 44%, respectively. Some economists argue that the BLS consumer price index may only be partially accurate because it does not consider factors such as the quality of goods and services and tends to focus on urban consumers rather than those living in suburban or rural areas. The Federal Reserve instead uses the Personal Consumption Expenditures Price Index reported by the Bureau of Economic Analysis, which showed a 6.3% month-over-month increase in July 2022.

The average consumer in the United States earns an annual salary of $74,949 after taxes. Based on the Bureau of Economic Analysis’ inflation rate, the average consumer has lost $3,747 in purchasing power over the past 12 months. For individuals earning an annual salary of $45,000, the loss in purchasing power is even more significant at $2,250. It is worth noting that a substantial percentage of workers, as many as 78%, live paycheck to paycheck and may struggle to make ends meet when faced with even a modest increase in inflation. This can make it difficult for these individuals to pay for necessities such as rent, loan payments, and childcare.

Employees Respond to inflationary warnings.

Some employers have offered higher-than-usual pay raises to retain employees and prevent them from being recruited by other companies. However, data Conference Board shows that overall salary increases in 2021 have averaged just 3%, with projections for 2022 also at 3%. This is in line with pay raises over the past decade, but it ignores that wage increases declined in 2020 for the first time in more than a decade. Despite these modest pay raises, they may not offset inflation. The result is increased calls from employee and labor groups for significant cost-of-living increases in the future.

Human resource professionals know the risks of not keeping employee pay at or above market rates. A PayScale study found that 51% of workers believe they are paid less than what is typical for their position. Employees who feel underpaid are more likely to look for new employment opportunities.

Inflation can also lead to increased expectations for salaries. The NewYork Federal Reserve Bank reports the lowest salary American job seekers are willing to accept for a new job has increased by 16% over the past year, going from $61,000 to $71,000. This suggests that people expect higher wages, even if they may not have the qualifications to justify them. As a result, Chief Financial Officers (CFOs) may face the challenge of addressing and mitigating demands for higher wages in the workplace. A recent study found that 57% of global CFOs expect labor costs to increase in the coming year, more than other business-related costs such as raw materials and shipping.

While it may not be feasible for many employers to offer double-digit wage increases, ignoring the impact of inflation on employee purchasing power can negatively affect recruiting and retention. Employers may need to consider other options to address this issue.

Here are several ways employers are helping employees in 2023

Companies may have the option to delay making decisions about wage increases until it becomes clearer whether inflation will be short-term or long-lasting. In the meantime, these companies may consider offering non-wage bonuses or benefits to address employee demands for higher wages without committing to long-term wage increases. There are many different perks and lifestyle benefits that H.R. professionals can consider as short-term bonuses. Still, it can be challenging to research and evaluate all options. Here are 20 ways companies can offer non-wage bonuses to their employees to help offset the impact of inflation.
Regenerate response

1. Employee discount program

An employee discount program is a good option for providing employees with everyday savings that can help offset the impact of high inflation rates. These programs should be affordable and easy to manage while also delivering a good return on investment. By offering employees discounts at local restaurants, reail stores, amusement parks, grocery stores, auto services, home suppliers, hotels, and other travel-related providers, you can help them stretch their paychecks and boost their purchasing power. These days, any company, can get a year-long subscription for a low cost per employee per month. For more information on employee discount programs, check out this free guide.

2. Student debt reduction bonus

Many companies, including Fidelity Investments, offer one-time bonuses to help employees with their student loan debt. Fidelity Investments, for example, contributes up to $10,000 per employee for student loan repayment and claims to have helped its employees save over $38 million in student loans by limiting the total loan length and reducing the genuine interest owed. This trend of offering student debt reduction bonuses is growing as more employers recognize the financial burden that student loan debt can place on their employees.

3. Tuition reimbursement bonus

In the past, some companies have implemented tuition reimbursement programs to encourage employees to pursue higher education and pay for their tuition. These programs have proven beneficial for both employees and employers. Employees who can further their education are often more loyal, productive, and engaged. At the same time, the company benefits from a higher return on investment. For example, Cigna, Accenture, and the Lumina Foundation found that their tuition reimbursement plan delivered a 129% investment return and helped them recruit high-demand positions.

4. New home down payment bonus

Many employers offer employee bonuses of up to $20,000 to use as a down payment on their first home. To qualify for this benefit, employees need to be with the company for at least a year and meet other minimum qualifications. These employers often require employees to remain with the company for a set period, such as three years, to receive the bonus. This program can help retain employees, particularly those struggling to afford a home in expensive urban areas. It can also reduce overall employee turnover, particularly among valued employees. One example of a company offering this benefit is a Canadian firm.

5. Family forming bonus

A study conducted by the nonprofit International Foundation of Employee Benefit Plans (IFEBP) found that 14% of employers now offer financial assistance to employees seeking to start a family. These benefits can include infertility diagnosis and treatment coverage, medications, intrauterine insemination, in vitro fertilization (IVF), egg freezing, donor eggs or embryos, and gestational surrogacy. These benefits can be a valuable resource for employees as they navigate the often costly and complex process of forming a family.

6. Preventive care bonus

Some employers are taking things further by offering bonuses to employees who maintain good health or lose weight. For example, employees at the weight-loss company NOOM receive a monthly premium of $200, or $2,400 annually, for staying fit. This bonus is deposited directly into their paycheck. It can be used for any health-related expenses such as weight loss programs, massages, or workout classes. Other employers may promote personal wellness by subsidizing biometric screenings or the purchase of in-home exercise equipment or gym memberships. These initiatives can help employees stay healthy and motivated to maintain a healthy lifestyle.

7. Bonus PTO

Paid time off is a highly valued employee benefit that can take many forms. By allowing employees to take time off to engage in meaningful or beneficial activities, you can help them feel more fulfilled and energized when they return to work. Consider offering sabbaticals, birthday time off, summer Fridays, a four-day workweek, or time off for volunteering at a qualified charitable organization. These benefits reward employees while promoting their focus, well-being, and productivity.

9. Appreciation Bonus

To attract and retain hourly employees, some companies are offering one-time “appreciation” bonuses. For example, Whole Foods provides a bump of $2-$3 per hour to hourly employees, depending on their role. In addition to this bonus, Whole Foods also provides an in-store discount of 20% for all employees. These types of rewards can be an effective way for companies to compete for front-line workers in high demand.

10. Music service subscriptions

Many employees listen to music to help them focus. At the same time, they work, and a subscription for a streaming service like Spotify Premium can be a popular employee benefit. In addition to providing entertainment, this benefit can generate goodwill among employees. Other apps that can be helpful for employees’ mental health and stress management include meditation apps like Headspace and Ginger. Offering a free subscription to these apps can promote better mental health and stress reduction among employees.

11. Travel and entertainment bonus

Many options are available to encourage employees to take a break and relax. One option is to provide free tickets to popular vacation destinations such as Disney or Universal theme parks. Consider offering discounted rates on hotels, car rentals, and airfare through an employee discount program. Offering these benefits can help your employees take a much-needed break and return to work refreshed and rejuvenated.

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