Despite the ongoing cost-of-living crisis and soaring inflation, only 3.4 percent of European companies are planning to increase salary budgets in the coming months, according to data from real-time compensation benchmarking platform, Figures.

What is more, only a fraction (3.4%) of those plan to do so in line with current inflation.

Of the remaining 65 percent, one in five said they plan to stick with their current salaries and will noit be adjusting compensation at all, while 44 percent admitted they are holding off, for now, because they are unsure which route to take.

Large-scale companies with 500+ employees, as well as publicly traded firms were found to be most likely to take action, while younger, smaller companies were most likely to hold off. Businesses in the UK were also more likely (59%) compared to 31 percent across Europe.

The Making Inflation Pay survey was compiled by Figures in a bid to understand how global organisations are responding to inflation, and the economic impact it’s having on their bottom line. Figures is a HR leader that provides businesses with more than 70k real-time compensation benchmarks from 1000 European startups, across a range of 100+ job types, locations and at companies of varying stages of growth. It supports companies to create the most structured compensation policy possible, with the help of its products and data in order to give them the confidence to be more transparent.

Split decisions

For its inflation report, Figures spoke to leaders from the companies it works with including in France, Germany and the UK – ranging from pre-seed to public – about their current compensation packages, future compensation plans and how they’re managing budgets.

The findings reveal that founders and People leaders across the board are struggling to agree on the best course of action, both in response to rising inflation as well as the demands from staff over the impact the cost of living is having on them. This is causing many companies to delay action.

Salary and bonus caps

Among those allocating additional budget for salaries, businesses are looking to increase budgets around 3-5 percent in the majority (49%) of cases. A third of companies plan to increase budgets below 3 percent, and around 15 percent of businesses surveyed are increasing budgets between 5-10 percent. However, this does not mean that increases will be equitable across their whole workforce – some may receive a 5 percent+ salary increase and some may not.

To put this into perspective, the rate of inflation has reached 10.7 percent in November in the UK, just slightly below the 41-year-high of 11 percent in October, and in Europe it reached 10.7 percent. Only 3.4 percent of European companies surveyed by Figures said they were planning to increase salaries by more than this rate of inflation, at 10 percent or higher.

In a follow-up survey, looking more closely at the context around salary budget trends, additional Figures data shows that 58.5 percent of companies globally are having to change how they approach budgeting to address the current economic context. Namely, to include inflation, and market adjustments within the calculations, alongside the traditional individual and company performance numbers. So much so, 68 percent of companies are, or are considering allocating a separate part of their budget to account for market adjustment.

What about performance reviews? 

This has also had a knock-on effect on how often companies are carrying out performance reviews, with 16 percent of those surveyed increasing the frequency of reviews so they can more quickly react to market changes.

“Our research reveals that business leaders are split on how to handle inflation on a global scale, and with so many options on the table  – from bonuses to salary raises, benefits and more – it’s little wonder,” said Virgile Raingeard, CEO and co-founder of Figures. “Organisations can’t tackle inflation but they can tackle how they respond to it with a robust plan built on communication, benchmarking, processes, and education. In such a critical period, the actions organisations take now will determine their future. Those who fail to act are likely to risk losing the trust of their workforce — not to mention their workforce itself.”

 

Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.