Employers are struggling to manage inflation in a way that helps their businesses and employees. Inflation has increased to record levels worldwide. Energy, food, and other costs increased dramatically following the pandemic, and the disruption to international supply chains caused by Russia’s invasion of Ukraine exacerbated the problem.
Workers worldwide have demanded pay increases to keep up with the rising cost of living. Transport workers in France, Peru, South Korea, and the UK, healthcare workers in Zimbabwe, and teachers’ unions worldwide have either gone on strike or threatened to do so.
Animate has listed three DOs and DON’Ts that each business owner should consider when trying to manage inflation in a way that helps protect their business and employees:
DON’T cut departments that generate cash flow
Reducing headcount in sales, marketing, and commercial teams is a popular strategic approach for businesses during periods of financial difficulty. These departments typically comprise a large percentage of the workforce, after all.
Losing employees in these areas may help cut costs in the short term, but it may also lead to a reduction in income.
It’s far easier said than done, but try to focus efforts on improving the effectiveness of these areas, if possible. Committing to digital transformation is one way businesses can become more efficient.
DO proactively engage with employees
Employees will never appreciate bad news; it’s only natural to be met with consternation when sharing plans affecting pay, benefits, or a potential reduction in headcount.
However, businesses owe it to their employees to be transparent about their plans as early as possible.
Pre-empt questions, address concerns early, and encourage regular feedback. Studies show that engaged employees are happier employees.
DON’T be in a hurry to lose your highest-paid employees
It stands to reason that your most talented employees are among your highest earners. It can be tempting to target those individuals when trying to make savings on your payroll.
However, recruiting and training talented employees can be difficult and time-consuming, and the process can ultimately become costly.
Make decisions that help you in the short term, but avoid committing to a course of action that will incur further expense in the medium to long-term.
DO encourage new ideas from employees for cash generation
Your management team doesn’t necessarily have to provide all the answers to every problem. The collective knowledge of your employees is a valuable asset.
Challenge your employees for new suggestions about how to maximise earnings from existing products and services. Can existing products and services be improved upon to justify company price increases? Are there any new products and services that can be created to help your business reach new market verticals, thus increasing potential earnings?
Don’t be afraid to ask for input from employees; empowering your workforce to share ideas can be mutually beneficial. Encouraging new ideas from employees is a great way to create engagement.
You can even incentivise successful ideas.
DON’T forget there are other ways your business can help employees manage inflation
- Several businesses adopted a remote or hybrid working policy during the pandemic. Embracing this approach temporarily or permanently can help alleviate employee travel costs.
- Encourage employees to take advantage of government-backed schemes that provide tax relief for remote workers, where applicable.
- Consider providing access to financial planning services. Group seminars and one-to-one advice could be invaluable.
- Engage with your HR team and devise a plan to offer emotional and mental health support to any employees who need additional help during this period.
- Offer discounted access to company products and services for employees.
DO get creative with remuneration and benefits packages
- Consider offering a retention bonus to employees. This provides an incentive for the employee while also affording the business a period to wait for the financial climate to settle. Any decrease in employee turnover will save the company money on recruitment and training in the short term.
- Could you publish a salary range for each role, thereby offering career progression for employees? Again, this can help to improve retention and save costs.
- Invest in the training and development of employees. Studies show that employee retention rates rise 30-50% for companies with strong learning cultures.
Understandably, employees are demanding salary increases to combat the rising costs of inflation. However, that’s easier said than done for businesses dealing with an increase in the price of goods and services.
Hopefully, this article gives you some fresh ideas to consider when trying to manage inflation in a way that helps your business AND your employees.
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