Compensation Strategies for an Era of High Inflation | Gartner

Talent Management

Despite the implementation of increased merit pay in 2023, employers are facing challenges in keeping up with rising inflation and meeting the heightened salary expectations of their employees. In the quest to attract and retain talent within this environment, total rewards leaders are exploring various strategies. This article presents three ideas and approaches to consider: 1) Utilizing alternate compensation vehicles, 2) Expanding the focus on the entire employee value proposition (EVP), and 3) Embracing pay transparency. When it comes to alternative forms of compensation (# 1), organizations commonly choose to increase pay without matching inflation (45%), or offer one-off bonuses (16%) (see Figure 1 below). Some companies have opted to raise salaries for specific hard-to-fill critical roles, while others have adjusted their strategies for demographics that have been severely impacted, such as millennials. According to several total rewards leaders, this generation is more conscious of cash and tends to respond more positively to immediate rewards like sign-on bonuses and tuition reimbursement, rather than long-term rewards like retirement savings. Regarding pay transparency (#3), organizations are implementing various strategies, such as sharing an organization’s compensation philosophy (38%), communicating formulas for how salaries are determined (30%), and sharing salary ranges in all job postings (26%). As organizations evaluate pay transparency and equity strategies, I am resharing this 36-page ADP Research Institute report that examines the factors influencing workers’ perceptions of pay equity.