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Inflation Salary and Wage Adjustments


Employer making inflation salary and wage adjustments

How Should Your Company Make Salary and Wage Adjustments Given Rising Inflation Rates?


With inflation rates steadily rising, a challenge that remains top of mind for employees and employers alike is salary and wage adjustments. Employers are navigating the complex reality of reevaluating their compensation strategies to ensure their employees are taken care of as the cost of living continues to climb.


The good news? You don’t have to do it alone! Keep reading as we share steps and strategies that your company can employ to address the impact of inflation and ultimately create a fair and sustainable compensation structure for your business and its people.


5 Steps Your Company Can Take to Adjust Salaries to Rising Inflation Rates


It is important to ensure that your company is adjusting its wages for inflation so that your employees’ purchasing power remains stable, and your compensation strategy competitive, in an ever changing economic climate.


Many employers are budgeting for 4% pay raises for 2024, but you can complete the following steps to figure out your company’s exact numbers:


  1. Determine the Inflation Rate – Determine the inflation rate in the region or country your company operates in. In the United States, this information is published on government agency sites such as the Bureau of Labor Statistics.

  2. Calculate the Adjustment – After you have determined the inflation rate, you will calculate the inflation adjustment percentage (IAP) based on it. You can use this basic formula: IAP = (Current Inflation Rate / Base Inflation Rate) x 100 The baseline inflation rate can either be a predetermined figure that is set internally by your company or a standard like the Consumer Price Index (CPI).

  3. Apply the Adjustment – Once you’ve calculated this figure, multiply each of your employee’s current salaries by the IAP to determine their new salary with the inflation adjustment. You can use this basic formula: New Salary = IAP x Old Salary

  4. Decide the Frequency of Adjustments – Decide how often your company will make salary adjustments. Annually? More or less frequently? Also consider your company status and policies as well as current economic conditions.

  5. Communicate with Your Employees – Ensure that you communicate the salary adjustments with your employees both thoroughly and transparently. This includes providing the reason for the adjustment as well as how it was calculated.


Now that you have the tools to effectively calculate and communicate salary adjustments for inflation, remember to also keep the following in mind so your compensation structure remains strong and sustainable for years to come:


  • Legal Compliance – Note that the specific process may vary by company and country, and it's important for companies to consult with legal and financial experts to ensure compliance with local laws, employment contracts, and best practices.

  • Record Keeping – Keep a thorough and clear record of salary adjustments for reference and auditing purposes.

  • Monitor Ongoing Inflation – Keep an eye on the current and ongoing inflation rates, making proactive adjustments as needed.


As we navigate the complex and constantly changing landscape of our economy, it is important for businesses to stay adaptable and responsive to the challenges posed by rising inflation. By following the five essential steps outlined above as well as keeping an eye on the key considerations of legal compliance, record keeping, and ongoing inflation monitoring, you’ll be able to do just this.


With a commitment to fair compensation practices and proactive adjustments, your organization will be able to foster a loyal and motivated workforce that benefits both your employees and company’s long-term stability.


Do you need additional support? Premier HR is here to provide solutions that will not only help your business survive, but thrive, in times of economic flux! Click on the link below to learn more about our Compensation Services.



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