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How companies plan to compensate for inflation

Majority of companies will not in near future compensate for inflation

Higher inflation than we have seen in decades is putting pressure on households and markets. A new survey shows that only 28% of companies plan to in the near future raise wages for all employees in response to inflation. 51% of CEOs and CFOs plan to adjust salaries only for top performing employees as an employee compensation strategy, according to a survey of 139 CFOs and CEOs made in June by US-based marketing and research company Gartner.

Gartner says additional survey data indicates that CEOs and CFOs are planning for heavier compensation investments in the future.

“A majority of respondents see permanent pay adjustments as a primary tactic for retaining talent, with 43% of respondents indicating they plan to deploy one-time bonuses to employees in addition to regular pay adjustments to retain talent, while an additional 39% of respondents indicated they plan to fully or partially index pay adjustments to inflation.”

”Survey respondents indicated that employee performance will be a key determinant in awarding pay rises to both salaried and hourly employees as a response to cost of living increases from ongoing high levels of inflation”, Gartner said.

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“Rising labour costs are among the most negatively impactful to operating cash flow, and it follows that we see a more limited approach to pay rises either by performance or in select markets for now,” says in a statement Randeep Rathindran vice president, research at Gartner.

“Organizations will continue to look at benefits beyond compensation as an approach to fight employee attrition and keep costs across the labour force as balanced as possible.”

Gartner says CEOs and CFOs are attempting to limit expectations for across-the-board pay hikes. 70% of those polled indicated that pay rises would only be forthcoming either to top performing employees or those located in select markets. Nearly one in four respondents favoured the most restrictive approach, offering pay increases to only top performers within selected geographic markets where inflation was the most severe.

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“The data shows that for now, executive leaders intend to hold the line against large-scale pay increases, and many employees expecting pay adjustments that fully compensate for cost-of-living increase may be disappointed,” said Rathindran.

“It’s clear that organizations are attempting to buy more time to read the tea leaves between persistently high inflation, the threat of recession and the state of the labor market before making significant strategic shifts.”




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