Inflation puts in check (again) the annual salary adjustment plan in companies

“There is a strong pressure because there are many things that we still see that can point to inflation be higher than estimated”, explains Claudia Rodríguez Santoyo, leader of Career Products at Mercer Mexico. According to the Total Remuneration Survey of the firm, while companies in the country expect to close the year with wage adjustments close to 6.10%, the consumer price index is estimated to end the year with a rise of 8.44 percent. This scenario puts pressure on the calculations for 2023, just as it was for 2022.

From the perspective of the specialist, the high levels and the variation that inflation has had in recent months is causing companies to project salary adjustments up to three points above the estimate of the price increase. “Just to be able to prevent these gaps that we have been experiencing in recent months.” For next year, the projection is of wage increases close to 8.0%, compared to the consumer price data that is projected at 4.76 percent.

In the breakdown of the data observed this year, according to Mercer measurements, salary increases were 5.0% for executives, managers and professionals, and 6.0% for operatives. Claudia Rodríguez acknowledges that in various cases these increases fell short of the growth in the cost of goods and services. “Faced with this type of pressure, what companies are doing is protecting themselves.”

In this context, he underlines in an interview, although the subcontracting reform and the implications it had for the distribution of profits had an impact on the finances of some companies, the other side of the coin is that the amount received by workers who did not had had access to this right helped reduce the lag wages had, which, even with increases, fell short of inflationary levels.

Salary adjustments are important not only to preserve the purchasing power of employees, but also to maintain a remuneration offer competitive in the market, points out the consultancy. “The most important thing here is to protect and retain your key talent. If you are not a competitive and attractive company for the employee in terms of remuneration, they will eliminate you as an option. It is important to have these salary adjustments and always in accordance with the mobility of the employees and what we are experiencing as an economic situation”, says Claudia Rodríguez.

In addition to salary projections for 2023, companies are also contemplating other actions to face inflation and its impact on compensation. According to the Mercer survey, the measures that companies analyze are:

• More rewards such as punctuality or attendance bonuses
• Increase compensation for everyone below average
• Pay for skills
• Increase everyone’s compensation
• Base on collaboration for salary, instead of individual contributions
• Bet more on work based on projects.

For Claudia Rodríguez, the pressures exerted by inflation on wages are leading Compensation and Benefits areas to a key role for business competitiveness in terms of talent.

“I believe that the Compensation departments today are once again a strategic area due to all the changes we are seeing, from redesigning the compensation package to benefits. All this part of the vacancies and the difficulties to fill them leads us to think that we have to be attractive and be consistent between the values ​​of the company and the reward that it is offering to its collaborators”, he points out.

Although the voluntary staff turnover is only 11% on average in companies, the survey shows that the main reason why people leave a job is dissatisfaction with salary, the second cause is personal reasons, followed by the interest in changing functions in the same industry, burnout and lack of flexible work.

Upward Flexible Benefits Scheme

According to him Benefit Study 2022 of Mercer Marsh, this year grew 40% the number of companies that is investing in flexible benefits and at least eight out of 10 companies are betting on virtual education as part of their offer of benefits superior to the Law.

“Although companies already have very defined benefits that they grant, the way they are granted is what is making the difference between companies,” says Gabriela Ruíz, deputy director of Benefits at Mercer Marsh.

Among the benefit packages, the specialist believes, an area of ​​opportunity is everything related to Diversity and inclusion. “Surely it will start to develop. We already see companies with a defined budget, with specific benefits in major medical expense policies that have to do with diversity and inclusion, but it is slow and that is the reality.”

The first step of flexibility in benefit packagespoints out the specialist, is that companies know their collaborators, understand their needs and how the market is moving.

“We have to be integrating benefits more than removing and I think we have to give a lot of strength to mental health, everything related to wellness y wellbeing It seems basic to me, but also telemedicine”, he considers.

For the specialist, the pandemic has been a turning point to move towards flexibility in benefit schemes and the incorporation of benefits superior to those of the law linked to health. “It would have taken us more years; The pandemic came to accelerate all this. There was always talk of doing it in the future, but far away”.