While signs indicate economic softening, employers must be active regarding compensation despite how they may be financially impacted in 2023. Companies should consider rising inflation, economic uncertainty, employee expectations, and the tight labor market as they develop their compensation packages and review schedules. Data indicates that many companies are considering larger-than-usual salary increases in 2023:
- Nearly half of U.S. employers plan higher year-over-year budget increases for compensation.
- The long-predominant 3% raise has been replaced by a median raise of 4% across all employees.
- 25% of employers plan to give wage increases of 5%-7% in 2023.
Companies may consider hiring new talent, keeping the current workforce from leaving, or promoting and hiring from within. As we are in an economic slowdown, it may mean a hiring freeze at many companies, but talent shortages may still exist, prompting organizational leaders to rethink their compensation approach. Here are some compensation strategies to consider in 2023:
1. Across-the-board salary increases– Talent wars are making it more important for employers to rethink salaries and benefits to encourage employees to stay. As pay transparency laws enforce in more states, increasing pay and publishing pay rates for already filled positions before legislation builds trust and helps retain talent.
2. Quiet hiring- Quiet hiring is when organizations acquire new skills and capabilities without obtaining new full-time people. Internal talent mobility is then focused on business priorities, helping to reduce fluctuations in employee headcount. Employees are promoted within and receive higher compensation for their new roles.
3. Education exchange– Investing in your people through internal training and outside education opportunities, such as technical courses or college education, can help retain talent for a set number of years in exchange for tuition reimbursement. Upskilling your workforce show employees you’re committed to their career advancement and advancing the company’s brain trust.
4. New benefits– Flexible work options such as telecommuting, flexible hours, schedules, and job sharing are key benefits employees seek. Voluntary benefits paid for by employees, such as mental health benefits, life insurance, accident insurance or critical illness and long-term disability insurance, or legal services, are in demand more so now than pre-pandemic.
5. Additional compensation- When retaining employees, salary isn’t only about base pay but the potential for them to acquire more. The extra compensation may include bonuses, perks such as physical items, memberships, or equity in the company.
Our team at Aspen HR can help you benchmark your compensation and benefits to those in your industry and help you design a package to retain top talent during today’s challenging economy and hiring environment.