How inflation is changing talent management in 2022

From price hikes at your local coffee shop to steeper grocery bills, everyone is feeling the impact of rising inflation. And while it’s happening on a global scale, the United States is seeing one of the biggest increases, with inflation at approximately 7% and reaching its fastest pace in over thirty years.

As living costs continue to rise, many employees are noticing a troubling trend: salaries aren’t keeping pace. Although compensation is trending upwards, pay budgets are trailing well behind inflation with an increase of just 3%. Yet despite these discrepancies, only about one-third of organizations plan on factoring inflation into their budget decisions.

In the midst of the Great Resignation, the lag between salary increases and living can understandably be reason enough for some employees to jump ship. However, you don’t have to accept ongoing turnover surges as part of your organization’s reality. Instead, business and HR leaders can evolve their total compensation and talent management strategies to give people a reason to stay. But what does it take to stay competitive in the war for talent when inflation is adding fuel to the fire?

Getting salary inflation facts straight

Price surges and out-of-control inflation are some of today’s hottest news topics. Headlines warn that we should prepare to spend more on everything, from restaurant bills and transportation to medical care. But what’s driving these price hikes? And what will they mean for talent management?

In simplistic terms, inflation is the loss of purchasing power over time. It means a dollar won’t go as far tomorrow as it did today. Plenty of factors that influence inflation, including consumer spending habits and supply chain problems. The inflation burst we’re seeing today is driven by both an increase in customer demand and pandemic-induced supply limitations, such as factory shutdowns and clogged shipping routes.

Unsurprisingly, discussions about salary increases are gaining momentum as inflation keeps rising. Nearly 99% of employers are planning raises. Yet the real question is how will those stack against inflation rates? It may still be too soon to tell, as there’s still a lot of uncertainty about how long inflation will keep spiking at the current rate. But most businesses are monitoring the numbers closely and rethinking total compensation—as opposed to just salary increases—to stay competitive as the war for talent continues.

Does inflation mean employees are about to jump ship?

For business and HR leaders, news about rising inflation during the Great Resignation inevitably leads to one question: are more workers going to quit? Since most businesses are already struggling with attrition, there’s reason to fear that discrepancy between living costs and compensation might be the nail in the coffin when it comes to turnover rates.

The truth is that many employees can probably find a job that pays better. But that doesn’t necessarily mean they’re all about to put in their two weeks. Ultimately, an employee’s decision to stay or go comes down to much more than what they’re paid. While salary is undoubtedly a major part of the equation, workers take plenty of other considerations into account, including workplace culture, DEIB initiatives, overall compensation packages, and growth potential. For example, research shows that mobility opportunities rank as a top factor that encourages workers to stay with their current employer.

3 Steps to staying competitive during inflation

While rising inflation rates may concern some employers, the good news is that there are several steps you can take to ensure your people feel valued. Here are some best practices to keep in mind:

#1. Show employees that their future is bright
When it comes to careers, your employees’ decisions are about more than money. Even if your people see an opportunity that pays better in the short term, they might not want to jump ship if they feel confident that your organization is the best place to grow their career. So how can you demonstrate that your organization is worth staying with?

Provide them with diverse opportunities. Employees need visibility into all of the opportunities within your organization. Instead of just telling them that there’s room to grow, leverage a talent marketplace with career pathing tools to show them. Employees can use these platforms to explore various directions their careers could take and identify experiential learning opportunities to help them bridge skills gaps and reach their goals.

#2. Set yourself apart as an equitable and inclusive employer
Today, employees are putting a premium on purpose and value. They don’t just want to work for a company that will pad their wallets; they want to be proud of their organization and its commitment to driving lasting change. More than 9 out of 10 employees say they would be willing to trade a percentage of their lifetime earnings for greater meaning at work.

Consequently, your company culture and ethos play a big role when employees decide whether they want to stay or go. This means that organizations must go beyond scorecards and surveys and start making strides to bring DEIB initiatives to life.

One of the most important inclusion steps you can take is to democratize access to career opportunities: this gives everyone at your company an equal chance to grow and develop. Since they’re powered by ethically constructed AI, talent marketplaces meaningfully align employees to opportunities based on their skills and experiences and remove bias from the equation.

#3. Empower people to build their skills
Everyone is calling skills the new “currency of work”. As knowledge gaps widen and skills’ half-lives shorten, building new competencies is the best steps employees can take to boost their overall worth.

If you want to hold on to your people, you must empower them to develop the skillsets required to achieve their desired compensation. By matching people to projects, gigs, and mentorships that align with the skills they want to learn, talent marketplaces help your employees fill the knowledge gaps they (and you) need (them) to bridge.

As inflation continues to rise and the war for talent intensifies, people leaders must go the extra mile to ensure their workforce feels inspired, engaged, and valued. To learn more about one organization’s journey to develop their workforce and empower their people, check out Seagate’s remarkable story.