Summary
- History tells us about the dangers of unchecked inflation, and how it reduces employee disposable income, diminishes their quality of life, and impacts your company's profitability.
- Inflationary pressures continue to negatively impact your employee’s buying power, and as a result, employees increasingly demand higher wages.
- A creative, non-wage bonus or benefit can appease the immediate demand for higher wages, without incurring a long-term wage obligation.
- See our curated list of 24 employee bonuses and lifestyle benefits that can help you offset the impact of inflation, without increasing wages.
Inflation's Impact on the Economy: A quick history
“History doesn’t repeat itself, but it often rhymes,” is Mark Twain’s oft misquoted adage. Regardless of who said it, it still rings true. Especially when it comes to inflation.
History teaches us that uncontrolled inflation--manifested by increasing consumer prices-- can impact everyday workers. This is especially true of those at the lower end of the pay scale. As consumer prices increase, workers’ buying power declines.
What happens when inflation is out of control?
After World War I, Germany’s obligations to pay war reparations led to their printing tons of money to pay their debts. With the exploding supply of the German currency, the value of the German Mark on foreign markets declined, leading to hyperinflation.
As inflation rates exploded, Germans needed a wheelbarrow of money to buy a single loaf of bread.
And let’s not forget a more “recent” history, as some of us seasoned folks remember the double-digit inflation years from 1978-1982. Inflation peaked at 14.8 percent in the spring of 1980, and the misery lasted for four uncomfortable years. Inflation surged and the GDP became stagnant, thus spawning a new term: stagflation. It was caused by the central bank’s increasing the money supply, along with the supply of consumer goods being limited because of a number of often unrelated economic reasons. (Sound familiar?)
If left unchecked, inflation can persist, causing cyclical forces to drive consumer prices even higher. This then drives employee compensation higher as an adjustment for inflation, and the economy cycles into hyperinflation, or potentially something worse.
We're living through another cycle right now.
The Perfect Storm
Let’s look back over the last several years, ever since the 2020 pandemic set off unprecedented disruptions to many economic processes. Who could have predicted the “perfect storm” of events that happened simultaneously to drive inflation?
The pandemic alone would have been enough to send any economy reeling. COVID-19 mitigation strategies were blamed for the drop in production of goods and services, as lockdowns forced many factories to slam the breaks on production, or even shutter their doors.
As production waned, consumer demand from home-bound households began an unprecedented buildup, potentially exacerbated by Federal programs designed to jump-start the economy. According to the Congressional Research Office, stimulus checks were a driving force in spurring consumer spending in 2020 and early 2021. While it helped many businesses remain solvent, those consumer dollars were chasing fewer goods, driving up consumer prices on everything from food and gas to vehicles and other commodities. This created the classic recipe for inflation: low supply/high demand.
To make matters worse, accelerated baby boomer retirements combined with the great resignation — spurred labor shortages, intensifying the war for talent, and bidding up the cost of labor in products across the board.
Even as inflation on consumer goods cooled, prices on rent and home prices (combined with soaring interest rates) rose steeply -- to the point that many would-be home owners are completely priced out of the market. By all indications, sticker shock persists beyond the periods of high inflation that caused it. Essentially, right now inflation is behaving like that obnoxious ex that just won’t take a hint to move on.
How much is inflation impacting your employees’ purchasing power?
Purchasing power is basically the growth or reduction in how much a consumer can buy with their money. Consumers lose purchasing power when prices go up, especially when their paychecks remain stagnant.
The latest (September 2024) 12-month, year-over-year change in the Bureau of Labor Statistics consumer price index increased 2.5% across the board. But, since the pandemic started in roughly March 2020, staples like milk, hamburger and unleaded gas are up an average of 32%.
Just how much purchasing power have consumers lost?
According to the latest government statistics, the mean or “average” household income is $80,610, which is up a mere 5% from the 2019 average income. By comparison, the all-items CPI (consumer price index) rose 19.2% during the same period. That means the average consumer lost $10,748 in purchasing power simply because of how much inflation outpaced wage increases.
With as many as 78% of workers living paycheck to paycheck, even the relatively modest 3.2% inflation of 2024 can mean the difference between paying rent, making a loan payment, or paying for childcare.
Employers Respond to Inflationary Warnings
Some employers have already responded to inflation and have offered a higher-than-usual pay raise to help boost employee retention, bolster morale, and keep those pesky talent poachers at bay. However, according to the Conference Board, for 2024, salary projections anticipate a 4.1% increase in wages. While that's an increase over the average 3% pay raises offered over the past decade, it still ignores an actual decline in overall wage increases since 2020.
This SHRM article points out that despite these modest pay raises, it’s still not enough to offset inflation. We can expect increasing calls from employee and labor groups to intensify their demand for a significant cost-of-living increase in 2025, and beyond, as employees' "real compensation" declines.
Given the challenges that most employers face, providing a double-digit wage increase across the board is most likely unfeasible, not to mention unwise. However, it is crucial for companies to acknowledge the impact of inflation on their employees' purchasing power. It’s such a big deal to employees, ignoring it will likely affect your recruitment and retention efforts.
Now, the question arises: What IS an employer to do?
Finding new and creative ways to offer a pay increase
Fact is, many companies simply cannot budget in the increases necessary to catch up with inflation. However, that doesn’t mean they’re powerless to do anything. In fact, many creative companies are exploring alternative options to meet the immediate demand for higher wages without committing to long-term salary increases.
With so many perks and lifestyle benefits to choose from, it’s hard for HR professionals to research all potential options for short-term bonuses, let alone vet which ones would work with your company.
We have a few suggestions...
Here are 20 ways to offer your employees a non-wage bonus, and help you offset the impact of inflation.
1. Employee Discount Program
We’ll start the list with our obvious favorite option, an employee discount program. As an answer to persistent pain from inflation, a quality discount program can deliver a significant boost to an employee's purchasing power. The best employee discount programs help employees stretch their hard-earned paychecks with practical savings on everyday essentials, like food, clothing, travel, automotive services, home improvement and more. Discounts like these could be a lifeline to those who struggle to afford the basics like food and clothing, and they can bring big-ticket expenses like travel back into the budget. Plus, when working with a quality provider, discount programs are affordable, deliver a great ROI AND are easy for HR teams to manage. Depending on the scale of your organization, securing an annual subscription could cost as little as a candy bar per employee per month. Check out this free guide to employee discount programs.
2. Student Debt Reduction Bonus
Some companies are giving a one-time student debt reduction bonus. The financial services firm Fidelity Investments is one of a growing number of employers offering to help employees pay off student loan debt, contributing up to $10,000 per employee for student loan repayment. Fidelity boasts it has helped its employees save over $38 million in student loans by limiting to total loan length and lowering the total interest owed. With the recent whiplash of federal student loan forgiveness being offered and then taken away (then offered then taken away again), employers who step up can be the hero of a generation of employees most likely to be overwhelmed by student debt.
3. Tuition Reimbursement Bonus
A long time ago, someone smart decided to encourage their employees to further their education and also pay their tuition. What they found was these employees were more loyal, more productive, and more engaged. Cigna, in cooperation with Accenture and the Lumina Foundation, discovered that their tuition reimbursement plan delivered a 129% return on investment. It has also served to help them recruit some of their most high-demand positions.
4. New Home Down Payment Bonus
A Canadian firm is one of a growing number of employers providing their employees with up to $20,000 to use as a down payment on their first home. To qualify, employees typically must be employed for at least a year, and must also meet other minimum qualifications. They also require employees to stay with the company for three years. For those who can qualify, the bonus helps prevent employees from resigning because they can’t afford a home, especially in the more expensive urban areas. It has also helped reduce the overall turnover of their most valued employees. At a time when some employees are simultaneously rent poor and priced out of the housing market, down payment assistance could make all the difference.
5. Family Forming Bonus
The number of companies that provide financial assistance to help with forming a family has grown in the last decade. For example, 40% of U.S. companies offer fertility benefits like infertility diagnosis, treatment and medication, intrauterine insemination and IVF. In addition to that, 34% offer paid adoption leave and/or financial help with adoption costs. Others still, cover egg freezing, the procurement of donor eggs or embryos, and gestational surrogacy.
6. Elder Care Support Bonus
Caregivers who work full-time are especially vulnerable to dangerous levels of stress and anxiety. Roughly 60 percent of caregivers have experienced at least one "caregiving-related incident" at work, such as working reduced hours, taking a leave of absence, or being warned about poor attendance or performance as a direct result of being a caregiver. Worse still, as many as 1/3 of caregiving employees have voluntarily left a job because of their caregiving responsibilities. Caregiving bonuses usually include time off to care for an aging parent and also provide access to aging resources, like legal or medical advice. It can all go to help caregivers worry less and be more productive when they are on the clock.
7. Pound of Flesh Bonus
Preventative care has become mainstream, but a new twist is for employers to offer significant bonuses to employees for staying healthy or losing weight. Employees at weight-loss company NOOM are offered a monthly $200 cash bonus — or $2,400 annually for keeping fit. The bonus is added to their direct deposit statement on their paycheck, and can be used for anything health-related, “including weight-loss programs, massages, workout classes, etc.” Other employers are choosing to promote personal wellness through subsidizing biometric screening (height, weight, glucose, blood pressure, lipid profile, etc.) others have subsidized the purchase of in-home exercise equipment or gym memberships.
8. Bonus PTO
Paid time off is likely the most appreciated benefit of all, and it can come in many forms. Some popular options include: paid sabbaticals, birthday PTO, summer Fridays off, a four-day workweek, or PTO for off-site volunteering, voting and more. You can give your employees a significant bonus by paying them to do something productive while they’re not at work. Not only can this have a powerful impact on your employees' focus, but on their well-being and productivity as well. Even if only a percentage of employees qualify, this can be a powerful option for many.
9. Appreciation Bonus
During the pandemic, some essential workers were temporarily paid more as “hazard pay” or “appreciation bonus.” Similarly, some businesses today will pay more for workers willing to take the less desirable shifts. For example, you’ll commonly see healthcare, warehouse and retail companies offer a shift differential on evening, overnight or holiday shifts. Other companies pay out appreciation bonuses as employees reach milestones of tenure to help reduce churn.
10. Music/Meditation App Subscriptions
Many employees listen to music during their focus time, and a subscription to Spotify Premium can be an addicting benefit that will not only get used but also generate a lot of goodwill. Likewise, Headspace and Ginger are popular meditation apps that can help your employees manage stress and learn how to focus on what’s important. A free subscription can lead to greater employee mental health and stress reduction.
11. Pet Insurance Bonus
With 67 percent of American homes having a pet, more and more companies are adding pet insurance to their existing suite of benefits. For pets with significant medical problems, vet bills can cost thousands of dollars. These employer-sponsored policies cover wellness exams, shots, chronic conditions, and acute illnesses and injuries. Most pet insurances offer an option to cover a portion or all of a pet’s medical expenses, with benefits specified for things like accidents, illnesses, and hereditary conditions. Companies are paying these premiums outright, or are simply offering discounted rates.
12. Corporate Cell Phone Plans
For larger employers that have negotiated a discounted rate for their business cell phone service, that discount can also be given to employees. Your company can choose to pay all or a portion of the employees’ monthly service, or they can simply take advantage of your corporate discount, which could add up to hundreds, if not thousands of dollars per year.
13. Child Care Reimbursement Bonus
Roughly 63 percent of American families have both parents working full-time, yet only 6 percent of employers offer some form of childcare benefit. Single parents especially face a financial double-edged sword when it comes to expensive childcare: they can’t live with it because it's too expensive, and they can’t work without it. Childcare benefits can include on-site childcare, childcare subsidies, flexible schedules, or the opposite–predictable schedules, back-up childcare assistance, or childcare-related Flexible Spending Accounts.
14. Employee Equity Plan Bonus
Whether you want to offer an ISO (incentive stock option) or an NQSO (non-qualified stock option), employee stock purchase plans can offer significant benefits to your employees, making them owners that invest in the future of your business, and reward them for their hard work. For companies that aren’t traded publicly, profit-sharing plans can also accomplish the same levels of employee engagement. If you’re looking for someone who administers such a plan, companies like Computershare can help advise you on the best solution for your company.
15. At-Home Massage/Chiropractic Bonus
Mobile massage networks, like Zeel, offer on-demand, licensed, insured, and carefully vetted massage therapists that can arrive at your employees' home, (or in the office) in as little as an hour. It’s a powerful bonus with high perceived value, yet at a relatively low cost. Those benefits extend to the providing employer too as relaxed employees tend to have more energy, motivation and concentration. You can also connect with one of many networks of chiropractors or osteopaths who offer vouchers or memberships.
16. Offer a Holistic Financial Wellness Program
This study focuses on the state of workplace wellness and found 25 percent of employees find their personal financial issues are a distraction at work. Offering a holistic financial wellness program offers important tools like an interactive budgeting tool, student loan payoff tool, and live counselors to talk about investing, taxes, retirement planning, building a financial reserve, etc. Organizations like Enrich Financial Wellness Program offer popular interactive courses, as well as interactive tools that will help your employees worry less about their finances and more about their jobs.
17. Travel / Entertainment Bonus
To encourage your employees to take a much-needed break, you have a wide range of options to consider, such as giving them free tickets to popular vacation destinations like Disney® or Universal® theme parks. If you have a good employee discount program, you could also obtain discounted rates on hotels, car rentals, and airfare, just to sweeten the deal. Another idea to consider is giving your employees free admission to U.S. national parks, which includes entry to 2,000+ federal recreation sites, all for one low cost.
18. Paid industry certifications
Some work-related certifications are not only time-consuming but expensive. Encourage employees to earn proof of their new skills, and foster a culture where accreditation is important--enough so that you’re willing to pay for these courses as a bonus. Many employees desire and appreciate the opportunity to learn skills that will help them throughout their careers. Plus, it may soon be even more important to the employers themselves. At the 2024 Conference for the Society for Human Resources Management (SHRM), keynote speakers stressed the urgent need for upskilling and reskilling of all employees to cope with the coming changes in technology like AI and automation.
19. Investment Club Bonus
Better Investing offers a step-by-step guide for starting an investment club. By using an outside source, companies can maintain an arms-length relationship with the club, yet still offer employees a bonus or stipend that can be directed to the investment club. Employees are taught how to set up a brokerage account, establish rules and procedures, and make investment decisions using real money. Sharing investment decisions and responsibilities with a group is a great way to teach employees what they need to know to become wise, independent investors.
20. Charitable Contribution Bonus
Employer matching programs have existed for years. Some companies match an employee’s charitable contribution 1:1, or even 2:1 or 3:1. But sometimes employees don’t have the means to make a meaningful contribution of their own to even qualify for the company match. Even though they want to give to a cause they care about, they’re just not yet in a financial position to do so. As a bonus, you can offer to donate (in their name, or as a shared contribution), to a cause an employee cares about.
21. Transportation Stipends / Rideshare Programs, Car Maintenance Reimbursements
Even with the popularity of remote work among employees, as many as 70% of U.S. employees commute to work alone by car. This number may grow as mega-corporations bring their employees, who grew accustomed to working remotely during the pandemic, back into the office. Transportation can be a major expense for those with long commutes, so many creative companies are offsetting those costs by offering public transportation passes, bike-to-work bonuses, or stipends to parking, rideshare services, carpooling and more.
22. Referral Program
Many companies recognize the value of a strong referral bonus program to recruit top talent. Structured correctly, a referral program can also have major benefits to those doing the referring. The first and most obvious benefit comes in the form of incentives and cash bonuses (which can range from a free meal to thousands of dollars, or even a free Vespa). Beyond that, employees tend to refer people that they like/get along with, and who will fit in well with existing company culture. That, plus the recognition and appreciation often felt from being able to contribute to the company, demonstrate how referral programs provide a lot of non-monetary value to employees as well, making them a true win-win.
23. HSAs and Alternative Health Insurance Plans
This year, healthcare costs are expected to rise 8%, which is the highest jump in over a decade, and is more than double general inflation. Higher premiums will mean less of their earned money will make it to your employees’ bank accounts. Many companies have found success giving employees the option to select a high-deductible health plans (HDHPs) which come with much lower monthly premiums and the options to start a health savings account (HAS). Younger generations and generally healthy people who have few ongoing medical expenses favor plans like these which give them more flexibility and control over their spending. Some companies take it a step further and match employee contributions to HSAs.
24. House Cleaning Services
If "time is money” as the old saying goes, benefits that give employees back more of their personal time can feel as beneficial as a monetary raise. Benefits like home cleaning services or meal delivery services help lift the burden of ongoing household chores and contribute to a healthy work-life balance. Help with chores may not be the first thing people think of for workplace benefits, but they can make a big difference for employees who are approaching burnout from juggling heavy work and home responsibilities.
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Keep in mind, some of these bonuses may come with tax benefits or consequences, while others may not be appropriate for your regulatory environment. Make sure you consult with your tax advisor or attorney about how best to make it work for your company.
Let's hear from you
This list of creative ways to compensate your employees surely isn’t exhaustive, so if you’ve implemented an innovative benefit, or if you’re thinking about new ways to enhance your compensation package, we want to hear about it. Leave your comments below so everyone can benefit.
