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Most are worried over how inflation, hitting 9.1% year over year, affects employees
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This article has been updated.
Most HR professionals are concerned about the effects of inflation on their organizations, including how inflation will affect annual pay raises for the remainder of 2022, according to new findings from the SHRM Research Institute.
Overall, 73 percent of 1,150 HR professionals surveyed from May 10 to May 24, 2022, indicated that inflation was a concern at their organization, while only 8 percent said it was not a concern.
Survey participants were randomly drawn from SHRM’s membership, and results were weighted to be nationally representative of HR professionals in the U.S.
"Employers recognize that inflation can have a major impact on the well-being of their team," said Johnny C. Taylor, Jr., SHRM-SCP, SHRM president and chief executive officer. "Many employers are re-examining their strategy when it comes to both pay and the overall employee experience. While many are still unsure about what will happen with pay, over half of those surveyed who’ve made a decision state that inflation will be factored into employee annual pay raises."
Pay Raises Trail Rising Prices
The annual U.S. inflation rate hit 9.1 percent in June, a new 41-year high, the U.S. Department of Labor reported on July 13. Salary and wage increases at U.S. companies, however, have not kept pace with rising prices:
Inflation began rising rapidly in 2021.
"The decline in real average hourly earnings at this point is terrible, the fastest pace of decline in 40 years," tweeted Jason Furman, who chaired former President Barack Obama’s Council of Economic Advisers.
An indication that inflation is likely to remain high was provided by the producer price index (PPI), a key leading indicator for the prices that consumers eventually pay. In July, the BLS announced that the PPI rose 11.3 percent for the 12 months ended in June, up from 10.8 percent for the 12 months ended in May.
HR’s Pay and Inflation Concerns
HR professionals responding to SHRM’s survey said the effects of rising costs on the lives of their employees was their greatest inflation-related concern. Among the roughly 70 percent of respondents who said they were aware of their organizations’ plans for annual pay raises, 63 percent reported that inflation was being considered or accounted for in annual pay raises this year.
That figure includes nearly 27 percent who said inflation is a standard part of their annual cost-of-living pay adjustments.
An organization’s size influenced whether it was more likely to consider inflation when setting annual pay raises. Among HR respondents who were aware of their organization’s pay raise plans, those who said that inflation is being considered or accounted for in annual pay raises included:
Other Findings
Among those in SHRM’s survey who indicated inflation was a concern at their organizations, 87 percent said their "highest concern" was how inflation would affect the lives of employees, followed by the effects on customers and consumers (70 percent) and on suppliers and wholesale costs (61 percent).
Industries where survey participants were the most concerned about inflation included agriculture (97 percent of respondents), wholesale trade (95 percent), utilities and energy (82 percent), and manufacturing (82 percent).
More Midyear Raises
Employers recognize that higher pay is needed to keep up with their rivals as workers pay more for gasoline, groceries and other daily living expenses, The Wall Street Journal recently reported. As a result, more organizations are offering midyear raises and bonuses to retain employees. For example:
Overall, about one-third of large U.S. employers are considering or planning midyear raises, according to Pearl Meyer’s research.
An April/May survey by consultancy WTW found that less than half of companies (45 percent) are sticking with the pay budgets they set at the start of the year, and more than one-third (36 percent) have already increased or plan to increase how often they raise salaries. Among those respondents, the vast majority have or will adjust salaries twice per year. The global survey included responds from 1,430 U.S. organizations.
"Compounding economic conditions and new ways of working are leading organizations to continually reassess their salary budgets to remain competitive," said Hatti Johansson, research director for rewards data intelligence at WTW.
Related SHRM Articles:
High Inflation Means Resetting Pay Strategies, All Things Work, June 2022
How to Avoid Unintended Consequences When Raising Pay, HR Magazine, June 2022
Inflation Continues to Surge, Affecting Wage and Benefits Planning, SHRM Online, March 2022
Salary Budget Growth of 5% Most Common Increase in New Survey, SHRM Online, April 2022
Related SHRM Resources:
SHRM Express Request: Salary Increase Projections 2022
SHRM Express Request: Salary Increases 2023: Survey Participation Opportunities
[Need real-time, HR-reported compensation reports? Check out the SHRM Compensation Data Center]
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
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