Leveraging Compensation During Uncertain Times

by Larry B. Comp · May 20, 2025

Rising inflation continues to be the #1 concern for most Americans. And while many experts expect that any such increases may be short-lived, that doesn’t ease the minds of today’s consumers. As prices rise, it’s only natural for employees to look forward to wages that enable them to afford the cost of goods and services, such as gas, daycare and groceries. The problem is these expectations could be higher than what employers facing rising labor costs can provide. But failing to offer competitive salaries & benefits may lead to losing top talent and the associated cost of replacing them. It’s a complex problem. The obvious consideration for mitigating the cost of inflation is to increase wages, but that may not be possible when employers face equally high prices. So, as organizational leaders, how can we manage salary expectations with employees’ concerns about inflation?

Have an Open Conversation

Be transparent with your team and discuss your company’s pay philosophy. You can eliminate surprises by showing you understand it’s a difficult time and communicating with workers about what to expect regarding salaries and any incentives. (This is especially important now that employee engagement is the lowest it’s been in 20 years, while the level of active disengagement continues to rise).

Leverage Compensation Data

Many of you have employees scattered across the country. Possibly the globe. To ensure your workers are fairly compensated, it’s important to know what comparable companies pay nationally and in local markets so you can remain competitive with your target markets. Employees may perceive they are being paid unfairly, regardless of whether they are or not. But by researching and knowing the numbers, you can address possible disparities and shift employees’ perception of their salary.

Think Total Rewards

While compensation is typically the #1 reason employees consider leaving their employers, we can’t take our eyes off the other 3 reasons (culture, development and benefits) employees quit their companies. Below are some actions we can take, as organizational leaders, to improve our employee retention.

Culture

This may be one of the easiest to address. It’s often said that “employees don’t leave their companies; they leave their bosses.” So, what can we do to:

Engender trust, support & respect
Improve engagement & ongoing feedback
Provide sufficient challenge & meaningful contribution
Manage change in an increasingly turbulent, global environment

Growth & Development

Our employees, (like the rest of us) are often less secure than they appear to be…they worry about the future…their skills becoming obsolete. What can we do to provide the right combination of:

Ongoing learning
Skill enhancement
Networking opportunities to support professional/career growth

What types of low cost, highly perceived benefits can be offered to aid in attracting and retaining quality talent, such as:

Flexible work arrangements (i.e., where and when they work)
Stipends for gym memberships, fitness/ meditation apps
Mental health exams

Compensation

During times, such as these, companies need to contain rising fixed costs. As such, this may be an opportune time to leverage variable pay to better align & focus your company on driving profitable revenue growth, while keeping your pay levels competitive.

Oh yes, research indicates that most of us don’t fully understand the value of our total rewards packages. How might we help our team members to better understand and appreciate our total rewards offerings?

So, by proactively addressing employees’ pay expectations, leveraging compensation data, and optimizing total rewards, we can minimize the adverse impact of rising inflation and the next wave of high employee turnover.

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.