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It's widely accepted that the next recession is already here and, for many, it came quite unexpectedly after the post-COVID-19 pandemic economic boom. What isn't surprising is the continued skills and labor shortage that's plaguing the country. With millions of job vacancies, many employers are struggling to meet demand.
Some businesses are trying to hire new employees while others are focusing on hiring internally by upskilling existing workers. What role does pay have to play in enticing potential and current workers? Does it need to be increased, and are pay increases a realistic option during an economic downturn?
Most companies are in dire need of highly skilled and experienced employees, especially given how competitive the market is. Organizations need to have the best workers in the business to achieve peak efficiency and productivity in a dog-eat-dog world. Optimal performance and output are particularly crucial during a recession when businesses can't afford to waste even a single penny.
The reality is that acquiring (or keeping) the employees you need isn't a cheap exercise. As the Society for Human Resource Management explains, employers across every conceivable field have been increasing pay to match employees' expectations. According to a survey the group conducted in April and May 2022, nearly two-thirds of the 1,430 organizations surveyed said they've increased remuneration budgets already and will continue to do so going into 2023. Fewer than half haven't or won't, and they're expected to pay the price.
So, in short, the answer is "yes" — if you're yet to give your employees raises, you should plan to. But how can you increase salaries or wages feasibly during a recession?
You need to ensure that you have enough cash flow to give workers raises. The most realistic way to increase remuneration is to cut the budget in other areas of the business. You can also decide to temporarily put a hold on making new investments, buying additional shares and taking on new business partners.
If you need and are able to, downscaling is also an option — by relocating to smaller physical premises (if your business doesn't operate exclusively online), you can save a considerable amount of money on rent, which can then be redirected to salaries. As Fisher & Phillips explains, you can also reduce the amount your organization spends on traveling for business. Achieve this by making the switch to virtual meetings and conferences wherever possible.
And, it may seem obvious, but have a look at your in-office expenditure. What are you spending on resources like stationery, break room supplies and superfluous equipment? While cutting down on these may disgruntle your employees a little at first, it's useful to communicate the end-goal. Workers appreciate a wage that can match (or surpass) inflation far more than a "free" donut or branded pen.
There are many plans you can make — you just need to find out which ones are right for your business.