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 Society for Human Resource Management (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 fresh 40-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:
- Average hourly wage growth was 5.1 percent annualized in June, down just a tad from 5.2 percent year over year in May, the Bureau of Labor Statistics (BLS) reported on July 8 in its monthly jobs report.
- Average base pay salary growth increased by an average of 4.8 percent year over year in the second quarter of 2022, according to a survey of more than 300 large employers conducted in May by Pearl Meyer, a compensation advisory firm.
With pay raises trailing inflation, the buying power of workers’ take-home pay has been shrinking. Real (inflation-adjusted) average hourly earnings, seasonally adjusted, fell 3 percent from May 2021 to May 2022, the BLS separately reported in June.
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:
- 76 percent at small organizations (fewer than 100 employees), including 27 percent who said cost-of-living changes are a standard part of their annual pay adjustments.
- 65 percent at medium organizations (100 to 499 employees), including 29 percent who make annual cost-of-living pay adjustments.
- 54 percent at large organizations (500 or more employees), including 27 percent who make annual cost-of-living pay adjustments.
Other Findings
Among those 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 |
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
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]