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If your company needs to save money, address compliance issues, improve efficiencies and increase productivity, we have the solutions and the key to your success.
Trust Key HR to provide you with…
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- It could be one of the smartest business decisions you ever make!
December Economic Outlook: Is The Past a Guide to the Future? Probably Not
- This year’s midterm results may translate into more of the same on the legislative front. But a key piece of retirement-focused legislation may help boost your savings.
- The Fed is still pulling the interest rate lever up, but there are indications that’s not a forever strategy. Whether those in control of monetary policy can create a soft landing for a stressed economy remains to be seen.
Did the strains on your pocketbook soften, almost imperceptibly, at the end of 2022? For once, inflation showed signs of easing, which beat expectations. After all the economic uncertainty of 2022, that small bit of news served as a welcome relief. But we all still have many questions about the economic outlook: Will the downward pull of pricing continue? With midterm elections in the rearview mirror, will legislators settle on an economic agenda? Most importantly, what’s the Fed up to? Here’s an end-of-year take.
Balancing an inflation-growth teeter totter Despite spending almost $17 billion—yes, that’s “billion” with a “b”—on state and federal midterm elections, November 2022’s winners won’t dramatically shift the governing landscape. Yes, Congress is now divided —Democrats in control of the Senate, Republicans of the House—but Republican gains didn’t prove as overwhelming as many assumed they would be. Whether that translates into a legislative agenda that may affect your wallet is another story. The best guess? More of the same—lots of lines around party membership, and little willingness to cooperate. Where a lot of attention remains is on the Fed. Their policy decisions in the back half of 2022 focused on taming inflation. While there are some signs it may be beginning to work, it’s not without consumer pain, a fact that Fed chair Jerome Powell acknowledged. Translation? Interest rates—and with them mortgage and car loan rates—can’t be something the Fed pushes up forever. Price stability, Winston says, isn’t the same as zero inflation: How much some things cost in the future will always fluctuate based on demand and supply. In general, inflation happens when demand chases a limited supply of goods; typically price growth then eventually slows. But Americans in 2022 are spending differently and supply chain woes continue to linger—thus inflation’s current durability. That’s why today is a different confluence of events than the 1970s: Current unemployment numbers look far better, helping keep stagflation (long periods of high inflation coinciding with slow economic growth) at bay. Measured optimism remains the message: Inflation built slowly then more rapidly in 2022, and it will likely release its grip over time. The Fed knows balance is difficult but essential.
Your wallet: One proposed piece of legislation to watch right now: Secure Act 2.0. Advocates of the bill—which includes both incentives for employers to add retirement benefits and investment protections for employees—may make a final push to get it through the lame-duck Congress (composed of current and outgoing members before those newly elected are sworn in). No matter what happens to Secure Act 2.0, think about adding any year-end cash gifts or bonuses to your retirement account to give your savings a boost.
Taking a ride in an economic time machine Contrast has defined much of the economic news of the last year and continues to do so now. Take inflation contrasted with unemployment, for example: Price increases are causing real pain for many; unemployment is not. In 2010,
unemployment was nearly triple what it is today—9.3%. That’s a lot of families who were out of work, combined with moments—such as in 2000 and 2008—when the bottom fell out of the stock market almost overnight. Right now, the market cycle has people reevaluating their financial goals—whether they can retire as planned, if they have to put more away in savings, if they can afford a mortgage.
Average US Pay Increase Projected to Hit 4.6% in 2023
Labor market and inflationary pressure fuel
higher-than-projected salary growth
Employers in the U.S. plan to boost salaries an average of 4.6 percent in 2023, up from 4.2 percent this year, according to a new study. Employers say inflationary pressures and the ongoing challenges of finding and keeping workers are the main reasons for the higher projected increases. Indeed, 3 in 4 of the 1,550 U.S. employers in the latest Salary Budget Planning Report by consultancy WTW say they continue to experience problems attracting and retaining workers. The survey was conducted from Oct. 3 to Nov. 4, 2022.
To fund higher pay, organizations said they are limiting benefits and perks to those most valued by employees (21 percent of respondents), raising the prices of their products or services (17 percent), and resorting to company restructures and reduced staff headcounts (12 percent).
“As inflation continues to rise and the threat of an economic downturn looms, companies are using a range of measures to support their staff during this time,” said Hatti Johansson, research director for reward data intelligence at WTW. “Organizations should prioritize their actions based on the needs of both employers and employees and pay close attention to market data to inform any changes.”
Adjusting Salary Ranges
To tackle the competitive labor market, more than half of respondents (57 percent) have hired candidates higher in the relevant salary range, WTW found, while a further 76 percent have adjusted or are considering adjusting salary ranges more aggressively, increasing ranges by 2 percent to 5 percent. More than two-fifths of organizations either have adjusted or are considering adjusting salaries more aggressively; 90 percent of organizations making or considering salary increase adjustments are doing two adjustments per year.
Other pay surveys, mostly conducted near mid-year, showed that salary increase budgets in the U.S. were projected to grow, on average, around 4 percent for 2023, with some industries planning increases lower or higher than the overall average, SHRM Online previously reported.
Lower Inflation Still Outpacing Pay Gains
The consumer price index rose 7.7 percent for the 12 months ending in October, a notable decrease from the 9.1 percent high notched for the period ending in June but well above its longtime average, leaving workers’ pay raises still significantly trailing the rising costs.
Insufficient Pay Raises Drive Employee Turnover
HR professionals in the U.S. say inadequate compensation is the biggest reason employees are leaving, according to new findings released on Nov. 17 by the SHRM Research Institute.
The institute’s Better Workplaces on a Budget survey report and Better Workplaces on a Budget Recommendations report draw on a survey conducted in August among 1,500 HR professionals. Inadequate total compensation was the most common driver of turnover, ranked among the top three reasons by 74 percent of respondents and listed as the top reason by 39 percent, the survey found.Relatedly, an 8 percent to 10 percent additional compensation budget would be required to address the issue, HR professionals generally agreed.
“It is clear that most companies cannot or will not commit to 8 percent to 10 percent pay raises for next year,” Mark Smith, director of HR thought leadership at the SHRM Research Institute, told Yahoo! Money. “In fact, pay raises in most companies seem to be only slightly higher than traditional raises from recent years.”
Among other findings:
Providing total rewards statements was the top recommendation for addressing this concern. While doing so would not raise salaries, it would allow workers to see a more complete picture of what organizations are paying to employ them. Promoting from within and publicizing these promotions so workers can see realistic advancement opportunities was the top recommendation to address concerns over lack of career development and advancement.
Worried About a Recession? Don’t Turn to Layoffs to Stay Above Water
Layoffs and salary cuts have long been methods to help preserve bottom lines in the face of challenging economies. But do these cost-saving measures actually deliver the most impactful ROI?
In recent months, companies across industries have laid off employees en masse, including H&M, Amazon, Morgan Stanley and Wells Fargo. The tech sector alone lost over 88,000 jobs. But losing employees won’t necessarily help employers weather an unstable market — it’s finding ways to keep them on board that could prove to be the wisest investment.
“It is hard to get great people — and once you have them, parting ways is really difficult,” says Rod McDermott, CEO and co-founder of executive search firm Interim Leaders. “Depending on how generous the company severance is, costs can be pretty significant, and sometimes there’s even outplacement costs.”
As employers brace for more economic uncertainty, McDermott notes that staffing decisions made in a moment of desperation can have long-standing consequences. Recruiting a new employee to replace those that were laid off can actually cost as much as three or four times the position’s salary, according to research from Interim. And culturally, employers can pay for layoffs long after desks are cleaned out.
“You’ve got the cost of the survivors,” McDermott says. “All the people that didn’t get laid off, where is their employee engagement? Where is their dedication? How much fear do they have? These are the times tha firms like us start getting phone calls from employees who didn’t get hit in the first round but are nervous for the next round. So you end up losing people that you didn’t want to lose, because [layoffs] were your solution.”
An unexpected employee shortage can often lead to the second worst consequence of layoffs, according to McDermott: short-term hires.Thirty percent of new hires leave their workplaces before reaching the 90-day mark, according to a survey from recruiting platform Jobvite, and as the Great Resignation lingers, talent is not going to stick around for a role that feels unstable.
The best thing an employer can do in the face of an economic crisis, according to McDermott, is to focus on the future of business and the satisfaction of the remaining workforce. This means being open and transparent about the state of the company and what it means for remaining jobs.
“A recession is a turn, a chance to pass your competition — don’t let it go to waste,” McDermott says. “Instead of making it a cost problem, make it a revenue problem, and tengage all your employees in solving that.
Maybe it’s not about laying people off, but maybe you slow down your hiring. And maybe you don’t replace people that leave, and instead let attrition cut your payroll. With those that are left, work really hard and really strategically to solve the challenge, which is usually profitable revenue.”
In the current economic climate companies that engage their workforce instead of letting them go will see the highest performance rates, according to McDermott. The labor market today is not the same as that of the last recession. If employers want to thrive on the other side of a downturn, they’ll need to work with existing talent and find new ways to problem solve.
“At the end of the day it’s uncertainty that drives leadership strategy,” he says. “You have to have faith that if you do the right thing you can solve the problem in a different way than just cutting costs.”
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- Posted by admin
- On December 15, 2022
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