S7E29: The Best Approach to Deal with Wage Inflation

How do you, as a leader, navigate salary decisions in this season of wage inflation and a tight labor market? There's lots of buzz right now about wages and pay structures, and you may feel pressured to respond. In this episode, Giselle Jenkins, a consulting director here at the Best Christian Workplaces, invites you to pause and consider how to help your employees thrive in an environment that provides not only fair compensation, but other important factors for a flourishing workplace.

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In this episode:

• What are you hearing from leaders on the topic of wages and inflationary pressure? What are the underlying concerns in this season as we face inflation that's higher than it's been in 40 years? (02:22)
• "They're thinking about things like my salary budget cannot possibly compete with this level of inflation, and my pay is now not high enough to attract, especially frontline workers. And, well, if I can't bring wages up fast, then I'm going to lose my talent." (02:48)
• "There's kind of this tentativeness of, should I act at all? What should I do?" (03:18)
• Given all of these concerns that leaders have, what do you advise them? Is it time to overhaul their salary structure or give everyone cost-of-living adjustments? (04:01)
• Are you up to date on your salary ranges? Are you losing people, is it hard to attract talent? (04:30)
• Questions to ask: Do you have an up-to-date compensation philosophy? (04:45)
• Have you increased your ranges recently? (05:08)
• "Don't overreact, because high inflation can only last for a period of time. But high raises to people and high adjustments to ranges, they're really hard to take back." (06:30)
• Can you talk a little bit about how inflation affects salary and how there's an inflation rate, how it does affect salary ranges overall? (07:50)
• "You usually take about 50 percent of that inflation, and you build it into the part of your merit increase that might be considered the COLA, the cost of living. So, it's about 50 percent of that increase is that. And then the rest of it is your merit." (08:42)
• "Well, employees often think if inflation is 8 percent, our ranges should move 8 percent. But that’s not past practice, and clearly, that’s not feasible now at all." (09:59)
• Giselle created a resource titled Harnessing the Power of Engagement to Fight Wage Inflation (11:00)
• What are some of the practical ways that leaders can make sure that their employees are participating in a sustainable, life-giving-work situation? (11:12)
• "We know from research and collecting a lot of data that wage increases in general are a weak solution to retention challenges." (12:18)
• "That it's about 5 percent of people that will talk about, 'I came for the pay,' out of 100 percent." (13:25)
• "What we advise is focus on those stronger drivers. Those are the stronger drivers. Those are the things that keep people. And so, when the labor market’s competitive, it's wise to look at the reasons people came, and then make it work for you. Go ahead and emphasize those things and especially fulfilling your promises to them. If you've promised an environment like I just described, are you delivering it?' (15:33)
• What other factors are important for leaders to remember now? Are there some other practices that develop employees and help create a healthy environment? (18:38)
• "People want better communication." (19:11)
• "Transparency about change." (19:59)
• "A close relationship with the supervisor." (20:11)
• "Listening to people's good ideas and suggestions and acting on them." (20:44)
• Keep building leaders in two facets —spiritual development and skill development. (22:45)
• "The first thing is, don't drop your merit program and just give people cost-of-living increases." (28:20)
• "Second thing is that you can't get the kind of reaction you're looking for with a COLA increase. So, I have seen several organizations give very fine COLA increases, like 6 percent, and their employees have dropped their scores on pay, and they have said, what did they think? They gave a 6 percent, and inflation’s 8 percent. This is not right. It is almost better not to give a COLA, just a straight COLA." (28:00)
• "Avoid the pitfall of lop siding your action plan to pay." (28:35)
• "Don't just do nothing." (29:29)
• What strategies and practices are going to help organizations and keep them growing in a healthy direction over the long term? (31:20)
• "The general answers are to understand what builds a healthy culture, because as we look at various really prominent leaders that we know in society that are talking about this, they all say, 'If you want a sustainable organization, you have to have a healthy culture. That is your number one tool.'" (31:30)
• "If you don't really understand how to address compensation in your field, then get some professional help." (32:25)

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