Should You Give Salary Increases for Inflation? Use This 3-Question Framework
Estimated Reading Time: 6 minutes
Inflation is squeezing household budgets—and that pressure inevitably makes its way to HR. As an HR Director or business leader, you may feel compelled to issue across-the-board salary increases. But is that the right move for your organization?
Salary increases for inflation may seem like a simple solution to today’s retention and morale challenges, but they can create long-term financial strain if not handled strategically. Before boosting compensation, ask yourself these three key questions. If you can’t confidently answer “yes” to all of them, it might be time to rethink your approach.
Why Salary Increases for Inflation Need a Strategic Lens
Some companies responded to inflation with knee-jerk raises—like a client of ours who implemented a 7% blanket increase. Now they’re struggling to support those increases sustainably. Inflation alone shouldn’t drive your pay decisions. You need a broader view of your compensation philosophy, infrastructure, and financial readiness.
1. Is Your Business Financially Able to Support Wage Increases?
Start here. Just because your business can offer raises today doesn’t mean it should.
You need to look 12–18 months ahead and determine whether projected revenue can sustain higher salaries long term. Ask your CFO this: What’s the probability of meeting our financial goals? Their answer gives clarity on bonus structures, incentive plans, and whether payline increases are viable.
Tip: If you’ve had a strong year, employees will expect recognition. If it’s been a tough year, share that story with your workforce. Transparency builds trust and encourages collaboration toward better outcomes. If your people feel involved in the journey, they’ll often rally to solve the problem—and deserve compensation adjustments if they succeed.
2. Have you done research on compensation before increasing salaries?
Before making any salary increases, know exactly what is considered competitive for each job role for which you’re considering an increase. I’ve had some clients who weren’t aware that their employees are already highly compensated; as a result, their planned salary increases were unrealistic for most roles. Make sure you’re spending your money wisely. (Our software, SimplyMerit, can help with this task!)
3. Are your organization’s salary increases aligned with work/pay scales?
It is important to have a well-defined job structure in order to ensure each employee receives the appropriate level of pay for the work they do. This helps avoid any confusion or ambiguity around who should be getting what amount of pay, and it can also help streamline the process of making changes to the pay structure when needed. Handing out salary increases feels better when they are sustainable, thoughtfully planned, and well-deserved.
Not sure if you should consider salary increases to keep up with inflation? Let us help you figure it out.
If you’re giving increases only because of inflation—without a philosophy or strategy behind them—or if you can’t remember the last time your HR team evaluated the organization’s compensation structure and salary increases, take a step back and do some planning first.
Attempting to untangle salary range data without a guide can be challenging, so let us help. At MorganHR, compensation consulting is our specialty. Our team of consulting experts helps organizations like yours plan for today and tomorrow, educating executives on how to make smart decisions about pay. Additionally, with our compensation software, SimplyMerit, you can streamline your pay structure and make sure that your employees are paid fairly for the work they do. Contact MorganHR today to learn more about SimplyMerit and how it can benefit your company.
