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Continued Inflation and Employee Compensation

November 4, 2022

Via: HR Hero

Many companies have weathered the impacts of inflation on the cost of their production inputs by simply passing such costs on to consumers; however, as central banks, led by the U.S. Federal Reserve, continue to raise interest rates, consumer spending is likely to decrease hampering the ability of employers to pass along costs.

One of the biggest expenses for any company is labor, and employees are beginning to pay much closer attention to how inflation is impacting their relative compensation. When inflation is exceeding eight percent per year, a five-percent pay raise represents a three percent decrease in compensation in real terms.

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