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With a potential recession on the horizon, we know you want resources to help your business master the moment. We've put together our Agility & Excellence Resource Center to bring you strategies and solutions with a finger on the pulse of what's ahead.
Employers are preparing to increase paychecks this year in response to soaring inflation, extensive labor shortages, and employee demands. Analysts predict that pay raises in 2023 will represent a significant increase compared with recent years - making it one of the largest wage increases since 2008. As a result, organizations must adapt their original budgets accordingly to remain competitive when hiring new talent or keeping current employees on board.
How much will salaries increase in 2023?
According to a recent report from Willis Towers Watson[i], on average, US employers are increasing the salary of existing employees by 4.6%. In addition, many employers are hiring workers at higher salary ranges. On average, new-hire pay is 9% higher than usual. Plus, more organizations than ever before now offer bonuses to assist workers in weathering these times of rising costs. Even smaller firms are stepping into the fray, granting cost-of-living adjustments to stay competitive and retain talent. According to a survey from compensation management company Salary.com, smaller organizations are likelier to provide cost-of-living increases than larger employers. On average, cost-of-living increases for smaller organizations range between 2.5% to 2.7%.
Where are businesses finding funds to increase pay?
Organizations are finding the funds to increase their employee salaries in various ways - from cutting costs to implementing new strategies. For example, many organizations are reviewing their current programs, such as retirement and health benefit plans, to determine where savings can be found. They may also be re-evaluating their workforce mix or experimenting with different staffing models that allow them to use their resources more efficiently and productively. Additionally, employers are rethinking how to make the most of their existing compensation plans. For example, they might consider offering bonus structures or incentive programs that reward performance and results instead of standard salary increases. Ultimately, these strategies will help organizations maintain a competitive edge.
What if a company can’t afford a pay increase?
Some employers cannot meet their employees' expectations due to financial constraints, but there is still hope. As a result, these employers increasingly rely on total compensation statements to help effectively communicate to employees the full value of the benefits and compensation they provide. Total compensation statements offer workers a complete picture of the monetary value of comprehensive benefits packages—including any perks that traditional benefits may overshadow. In addition, employers can focus on non-financial incentives and rewards. Some examples include offering flexible working arrangements, providing access to learning opportunities, implementing profit-sharing plans, or offering remote work options for employees who wish to work from home. These incentives can be a powerful tool in retaining talent and motivating employees, despite not having the resources to increase salaries.
As the uncertain economic climate continues, it's up to employers to ensure their competitive edge and keep both current workers and potential hires satisfied. The best way for organizations to do this is by understanding what matters most to employees. With a combination of market data guidance and employee needs in mind, companies can find maximum success.