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How Small Business Owners Can Retain Employees During Inflation
September 9, 2022
As 2022 winds down to the fourth fiscal quarter, many small business owners tell us they cannot remember when finding and retaining quality employees was so challenging. As 2021 wound down and this year started, it seemed all we were talking about was the Great Resignation and employees jumping ship for the “greener pastures” of a competitor or even an entirely new field. On top of that, business owners now have to manage inflation and its impacts on their employees, which presents another precarious situation for them to navigate.
How Can Business Owners Retain Their Employees in a Volatile Market?
At the beginning of this year, we advised our clients that it is crucial to raise wages, enhance benefits, and nurture a culture that would encourage your best employees to stick around.
More specifically, we advised business owners to watch out for the “poaching” of C-suite execs. This practice occurs when companies give their recruiters incentives for aggressively filling spots and encouraging them to reach out to candidates who are not actively applying for new opportunities. The recruiters jump to their inboxes and make offers the candidates “can’t refuse.”
We mentioned wage-based solutions to counteract “poaching” and employees otherwise resigning. First, business owners should conduct salary reviews to understand what it would cost to give their employees raises. We recommended that if it wasn’t possible to raise wages 10% in one go, business owners could offer employees a 5% raise right away and another 5% added after they reached performance indicators. It’s been several months since we provided these recommendations, and we figured now was a good time to re-evaluate this topic.
Record-setting inflation rates and fuel prices have dominated the spring and summer headlines. Your employees likely feel this pinch, particularly those commuting into the office (as we strongly believe they should be). Sharp increases in employee cost of living might pressure business owners to raise wages again – less than a year after they first issued some to combat the Great Resignation.
How Can a Business Owner Help Their Employees Manage Inflation Without Another Round of Wage Increases?
We advise clients to take a more creative approach than across-the-board wage increases. For example, even though gas prices are falling, they are still considerably high compared to years past. However, depending on which economist or financial pundit you listen to, that doesn’t necessarily mean they will stay this high. Inflation has also jumped, but many prices may decrease as supply chain issues are resolved.
If you hand out raises on a percentage basis now, it’s implausible that you will be able to lower wages when prices fall. How would your employee morale be affected if you issued a wage decrease six months after the fact?
The best tactic to help your employees with a short-term cost of living increase is a one-time wage bonus or even a pre-loaded gift card with an amount that could offset their increased expenses. These tactics will show your employees that you acknowledge their situation and want to support them. Gestures like these go a long way toward building a culture of retention. With these one-time bonuses, you won’t have to decrease any wages you may have prematurely raised to account for inflation.
How Can Business Owners Stay Prepared to Handle These Challenges?
If knowing when to raise wages or when to use one-time incentives during inflation seems daunting to you, you’re not alone. At The Alexander Group, we coach business owners on how they can run their businesses in line with their vision and exceed their goals. Our one-on-one coaching will help you reduce stress by balancing your business and personal lives. With our decades of business experience, we’ve seen everything and can help you through the ever-changing market.
Having a group of individuals with similar goals is also vital. Our group of Greater St. Louis area business owners collaborates, discusses common issues, and develops dynamic solutions. When business owners pair this with our one-on-one coaching, they set themselves up for success. Contact us today if you’re a business owner ready to gain commitment to improvement.
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