Inflation: How to build an inflation-proof compensation strategy
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Inflation: How to build an inflation-proof compensation strategy

Category
HR

Key figures

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According to the latest business report from the national statistics institute, published on December 15, inflation was estimated at 6.6% for the last month of 2022. This phenomenon is at an all-time high.

Companies then face two main challenges:

Growing expectations from employees

There is volatility in the evolution of compensations, depending on the macro and micro economic context.

To help you be as close as possible to the evolution of the market, Figures offers you interesting studies:

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Figures ❓ Compensation data platform which allow CEOs/HRDs ✨ 10% discount Get access

Structure and provide visibility on compensation

To help you tackle this topic, take an appointment with Sandrine Dorbes on Compensation Policy.

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Free Office Hour Compensation x Sandrine Dorbes She can help you on: defining your compensation/bonus policy, profit sharing schemes and compensation benchmarking. 🕑 45min | 👉 Book a meeting here

How to deal with Inflation?

There is no inflationary wage increase and no clear solutions regarding inflation (depending on convictions, types of companies, financial ressources, communication…).

Solutions
Pros
Cons
Reinforce benefits (transports, remote equipments…)
The company increases the purchasing power of employees while limiting the weight of wages in the P&L.
No direct salary increase.
Retain talents, giving a bonus to the talents you want to keep
The company keeps the important members.
Preferential treatment for specific employees.
Wage increases for all (ex: +5%)
Good perception from employees, increase in their motivation.
Increase in the weight of wages in the P&L.
Decide to increase the company's lower wages (ex: less €30K)
Give more purchasing power to people the more impacted.
Feeling of inequality for the Key People of the company.
Offer time by encouraging telecommuting, reducing working hours, offering paid vacations
Allow employees to take a break and reduce certain costs. For the company, it is also an opportunity to reduce its fixed costs.
Can lead to less productivity.

Examples of practices to implement

Cécile Plessis from HR4team gave us a feedback on the companies she supports:

Companies can do several things:
  • Implementation of the value-sharing bonus (Macron bonus) at the end of December, which allows for the introduction of a tax-free bonus
  • Implementation of a collective increase for all employees
  • A larger individual increase budget than in previous years, based on the amount of inflation at the end of the year (approximately 7%)
Cécile Plessis
Cécile Plessis, founder of  HR4Team

Find out what 200 companies have put in place to meet inflation and employee demand with Figures →

How to communicate on inflation to the team?👩‍💻

Here are some best practices to communicate your compensation plan:

  • Communicate with the CFO: this is how you will be able to make the right decisions regarding your P&L for instance.
  • Communicate in accordance with the company's culture: If compensation is on an individual basis, it should be considered as confidential. If you’re fully transparent on your salary grids, it should be considered as public.
  • Propose a clear, transparent and easy-to-read plan for everyone: Most importantly, candidates and current employees need to understand why you did what you did.

Help you tackle this topic

To approach this topic in the best way, you can benefit from a *free 1to1 meeting (45min)* with an HR Expert :

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Free Office Hour HR x Cécile Plessis She can help you on: Legal, compensation, HR internal process, hiring process and layoffs. 🕑 45min | 👉 Book a meeting here

Additional resources

Read our 💸Digest: Compensation Policy Workshop (Old).

Visit our 💶Compensation Tools with a lot of compensation benchmarks.

Read the Welcome to the Jungle Ebook about compensation:

Read the “Livre Blanc” from Simon-Kucher. In a context of uncertainty and persistent inflation, it will give you a vision of the priority growth issues and levers, beyond the tactical price management: