Everywhere I turn there’s a Suffolk County business with a “Now Hiring” sign in the window. Are you seeing this too? Staffing is an issue in every industry across the country.
Part of that? Making money isn’t the only reason people want a job. 2020 certainly shifted priorities. Even if you could throw more money at a phenomenal potential hire, it’s not a guarantee that would be enough to entice them to take the job.
What’s been revealed through the Great Resignation is that people are looking for MORE in their workplaces. And when you’re hiring, you need to consider that.
Job seekers want flexibility. They want support. They want a working culture that actually cares for them and brings them real value. And if you’re not making that pivot, you’re in real trouble on the hiring front – maybe even in terms of keeping great employees.
And I do want to talk about how to take care of your employees right now… especially with inflation’s nasty grip squeezing their wallets (and yours).
But first, have you thought about how to get your business through a lean year (or a few lean years)? Or have you been thinking about how to raise wages without breaking your bank account? Those are some things we should discuss before it’s too late:
Now, naturally, when prices are rising everywhere, your employees are going to start coming to you, wondering if you’ll also adjust their pay rate to meet the pressure of inflation. And a good boss will most certainly give raises to employees as they bring value to the company.
So, how do you plan for raises and inflation occurring at the same time? Let’s take a look…
Raises and Inflation: Suffolk County Business Owners, Listen Up
“Everything is negotiable. Whether or not the negotiation is easy is another thing.” – Carrie Fisher
Rising prices take a double edge to your Suffolk County business: They tempt you to give your workers lavish raises to keep them happy – or give no raises at all to keep you in business.
Business owners all over the nation say that to cope with rising inflation they’re raising prices or cutting staff. At the same time, they’re bombarded with cash flow struggles, rising production costs, reduced sales and slimmer profit margins, and drops in customer loyalty and satisfaction. What can a small business even afford for raises this year?
Our inflation series continues with a look at what you should think about concerning worker raises and inflation periods.
The up and up
Wages are on the rise in a big way. A recent survey from the Conference Board predicts almost a 4% jump in wage costs for companies in 2022, the highest in 14 years. Amid a staffing crunch, one major trucking company is hiking pay by as much as 33%, even for drivers just out of training.
Adjusted for inflation, though, the real value of wages has been on a steady decline for the better part of a year. And wages weren’t great before that, many say, which has helped fuel the Great Resignation. Now gone are the days of the old 1-2% annual bump.
Given inflation, workers expect raises this year – sometimes as much as 10% – or they walk. Again considering inflation, anything less than 5% might actually seem to your employees like a pay cut, the way prices are going.
So, you want to do right by your workers, but you’re crunched, too. What can you do about raises and inflation and keep everyone happy?
Start with the numbers to plan your raises, as well as what else you have to keep in mind.
For one, wages rose only about 3.3% in the latter part of 2021, but employees who switched jobs saw almost double that increase. Companies that can afford it say they’re looking at 6% bumps across the board with extra for good performance and other incentives.
Of course, giving more to one employee can mean less for everyone else – and that includes signing bonuses paid and expected higher starting salaries for hires. Those are at the expense of your more-senior workers, leaving you in what staffing folks call an “upward pressure” dilemma regarding merit raises (more in a sec about who deserves one of those).
Another factor: Raises compound into the future. Any pay hikes this year will become the base salaries you’ll have to work on for raises in future years for both salaries and percentages of increase (assuming the workers stay with you). Do the math forward. What will you be able to handle down the road?
One strategy is hanging raises on promotions. The latter typically carry a larger percentage raise – 10-15% seems to be the sweet spot – and those only occur occasionally in a worker’s entire time with the business. You won’t be expected to duplicate them every year. You can also try bonuses (Google recently gave out a four-figure one), an incentive that most employees recognize as a one-time event not likely to be repeated regularly in years to come.
Who deserves a raise?
Cost of living aside, you’re not in business long before you realize that some folks deserve more money over time than others do, whether because of their function at your company or their work habits or because they’re in such desirable fields as IT, engineering, or finance.
Across all your employees, though, there can be clear signs that somebody needs and deserves a promotion and/or raise before they leave you for greener pastures. Think of it as a smart investment of your money.
Here’s what to look for:
Volunteering: They don’t hesitate to do hard work off-hours, either on the job or through professional development. They’re eager to help co-workers – who recognize and appreciate the help – and they show natural leadership.
Questions: They have the professional maturity to ask good ones and about the company in general, not just about their own place in it.
Production: Theirs is way above average and is measurable, profitable, and consistent. In many ways, they’re already at the next level and are just waiting for you to confirm it with a promotion.
Self-management: You rarely need to hold their hand.
True, raises are just one management tool in your small business but a big one. Like any other expense for your company, it’s key to spend that money the best way possible – especially these days.
Even though you have a bottom line and rising prices might be affecting it, finding ways to compensate employees (and do it well) needs to be a priority. Of course, navigating raises and inflation can be a tricky thing when things are tight. Schedule a time if you need a bit of guidance on this issue:
You’re not alone in this. My team and I are…
On your team,
Edwin Casanova CPA PC