We are in a time when many budgets are “frozen”. And it seems we are all waiting to see what happens with the adoption of the new tax measures and the effects they will have. For this reason, wages have stagnated this year or increased by lower percentages than in previous years. But you can feel the tension in your team. People are increasingly worried about the rising cost of living and the fact that wages are not keeping up. How can you support them? Find out below what solutions you have at hand to motivate your people when you don’t have the budget to increase their salaries.
The last four years may have been full of unforeseen situations in your business. And after the pandemic, you feel the inflation at the business level. And you try to take care of both your business and the people on your team. Start by keeping up with inflation and cost of living data!
INFLATION DOWN, PRICES INCREASED
The annual inflation rate decreased in September to 8.8%, from 9.4% in August, in the conditions in which food goods rose in price by 10.36%, non-food goods by 6.68%, and services by 12.10%, according to the data of the National Institute of Statistics, published on October 12, 2023.
The average rate of change in consumer prices in the last 12 months (October 2022 – September 2023) compared to the previous 12 months (October 2021 – September 2022) determined based on the HIPC (depreciated index of consumer prices) is 11.4%, according to the data of INS.
HOW MUCH MONEY DO PEOPLE NEED TO LIVE DECENT THIS YEAR
The Friedrich Ebert Foundation Romania and Syndex Romania have recalculated the value of the basket based on the price indices communicated by the National Institute of Statistics for September 2023, compared to September 2022.
Thus, the value of the minimum consumption basket for a decent living for a family of two adults and two children is 9,978 lei per month, compared to 8,659 lei in September 2022, increasing by 15.2%, according to data from the Friedrich Ebert Romania Foundation and Syndex Romania.
For a single adult, the value of the minimum consumption basket for a decent living this year is 3,807 lei.
The value of the minimum consumption basket for a decent living of a family in 2023 is:
- a family of two adults and two children is 9,978 lei per month
- a family of two adults and one child is 8205 lei per month
- a family of two adults without children is 6162 lei per month
“The increase in the total value of the consumption basket is determined by the strong increase in costs for all chapters, except housing expenses (water, electricity, gas, and thermal energy),” the Foundation’s press release states.
INFLATION IS HR PROFESSIONALS’ CONCERN
The Society for Human Resource Management (SHRM) surveyed 1,150 HR professionals, and 73 percent said inflation is a concern for their organization. Almost 90% said their main concern was how inflation would affect the lives of their employees.
HOW TO MANAGE WAGES IN AN ECONOMIC CONTEXT THAT DOESN’T ALLOW YOU TO INCREASE SALARIES
Due to the fierce talent competition, salaries increased at higher rates in 2021 and 2022 than in previous years. But those wage increases have not kept pace with inflation rates. Now, to keep co-workers’ morale high and avoid turnover, consider ways you can offer raises or bonuses. You may also need creativity in this process.
Analyze the competition
Monitoring your competition is always important and helps you stay financially relevant to your peers and candidates. According to a survey carried out by one of the recruitment platforms in Romania, 6 out of 10 companies say that they have budgeted salary increases for this year, while 73.7% adopted this measure last year as well.
A quarter of survey respondents say wages will not increase by more than 5% this year, while 37.5% have scheduled increases between 5% and 10% compared to last year. 20.8% announce increases of 10% – 20%, and 12.5% of employers say they will be adjusting salaries for inflation.
Give bonuses instead of financial raises
If salary increases are not possible in your company, consider bonuses. Rethinking your bonus structure can be a good way to keep normal business costs under control while increasing employee compensation. Consider creating a monthly or quarterly incentive program. This structure allows people to earn extra money based on engagement and also brings business results. It’s a win-win solution for you and your team.
Most employees understand that inflation affects not only them but your business as well. And some of them know the financial aspects of the business environment, through the discussions they have with clients. Be transparent with them about the company’s salary budgets when discussing salaries. If the budget only allows for a 4% increase across the board, for example, explain it to your colleagues. Be open about how the business is going. When people see that you’re making a real effort and providing transparency, you can earn their loyalty.
Be clear about the criteria for earning a raise
During performance reviews, give colleagues clear criteria for how they can earn a raise. This approach gives employees confidence that raises are objective and they can get them good job performance. Once the criteria are clear, employees will understand why they earned a raise or what improvements they need to make to receive one next time.
Be financially fair
You can choose to offer bonuses and raises, perhaps less than last year, based on job performance. But at the same time, aim to adjust employees’ salaries fairly, avoiding favoritism. If one employee gets a smaller raise than another in a similar role, make sure you can clearly and objectively explain why. Being transparent before you’re asked helps you create strong employer branding.
Provide help with day-to-day expenses
Even if you cannot increase wages, you can give financial support to employees. Enter into partnerships with local businesses and offer colleagues cards or discounts for shopping or restaurants. You can also cover part of the childcare costs. Another option is to offer a one-time bonus based on cost-of-living needs.
Even though most colleagues may be back in the office, allow them to have more control over their schedule and work environment. For example, allow them to choose their work-from-home days, choose a day when the whole team works from home, or have flexible start and end times. This way they can save on commuting and childcare expenses. Flexible working hours help people manage their time more efficiently, perhaps have other activities that bring them financial gains, and can reduce the need for paid time off.
Implement a financial wellness program
An effective way to support employees who are concerned about inflation is to offer a financial wellness program. This can help them make more informed decisions about their financial future and allow them to better manage their money. This could include access to financial advisors, offering financial education training, or credit counseling.
Create customized benefit plans
As people on your team become more concerned about inflation, one way to support them is with a customized benefits plan. This means letting them decide what benefits they want the company to offer them. For example, if a person doesn’t want to use health benefits and instead wants more funds for their children’s education, the company should accept their request. To keep things under control, an employer can define a limit on the amount that can be claimed by a team member. This approach can significantly improve loyalty and increase employee satisfaction in a company.
ASK FOR THE SUPPORT OF AN EXPERIENCED RECRUITMENT TEAM IN SALARY NEGOTIATION
The BIA team has over 30 years of experience in recruitment and can offer you business support. We want you to have more time for your team and we always try to find the best solutions to attract new colleagues, but also to negotiate salaries with them. Here are the advantages of recruiting through BIA HCS:
- 90% of projects are completed through direct search and headhunting.
- Reduction of recruitment time, some positions were filled in less than 5 working days from the start of the project.
- Recruitment experience in different fields: accounting, construction, retail, medical, pharma, automotive, and architecture.
- Integrating the job profile into the company culture and defining the candidate search strategy.
- Support in presenting job offers and negotiating with the candidates.Tell us about your business and recruitment needs at email@example.com
GOOD TO KNOW ABOUT the WAGE INCREASE
What is the average salary increase per year?
When setting employee pay, it can be helpful to have some benchmarks. Through mid-2020, the average 12-month wage growth in the US was between about 2.4% and 3.2%. In 2021, however, this increased to 4.2%; by September 2022, wages had increased by 5.1% compared to the previous year.
What is a good salary increase percentage?
While traditional salary increases are around 3%, inflation rates were much higher in 2022 and 2023. This means that even after getting a 5% increase, the purchasing power of the people on your team would be still lower than it was a year ago. Keep the cost of living and shopping basket in mind when planning salary increases. Correctly compensating employees is more important than ever. After all, if salary growth rates don’t keep up with inflation, you may see more of them changing jobs.
What are the projected salary increases for 2024?
The minimum wage must increase to half of the average wage, because, by the end of 2024, Romania must implement the European minimum wage directive. It’s not a minimum wage at the European level, but a method of calculating the average income in each EU member state, i.e. 50% of the net average salary in the country or 60% of the median salary.
Thus, the minimum net salary would increase from 3,000 gross lei to 3,800 gross lei, i.e. half of the average salary of 7,600 gross lei, zf.ro states.
A new survey by consulting firm Mercer finds that US employers plan to raise wages by 3.5% for 2024, compared to the 3.8% they gave in 2023.