CFOs growing reluctant to grant across-the-board pay hikes

Accounting

Despite surging inflation levels and the ongoing labor shortage, less than one-third of top executives plan to offer salary increases to all employees, according to a new survey.

The survey, released Monday by the research firm Gartner, polled 130 CFOs and CEOs, and found only 28% indicated they plan adjustments for all workers, while a little over half (51%) the respondents said employee pay increases will be tied to performance.

Despite a tight labor market, and high attrition risk, top executives are trying to limit expectations for across-the-board pay hikes. Seventy percent of those polled by Gartner in June indicated that pay rises would only be going to top-performing employees or those located in select markets. Nearly one out of four respondents preferred the most restrictive approach, offering pay increases to only the top performers within specific geographic markets where inflation was the most severe.

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“Rising labor costs are among the most negatively impactful to operating cash flow, and it follows that we see a more limited approach to pay rises either by performance or in select markets for now,” said Randeep Rathindran, vice president of research in the Gartner Finance practice, in a statement. “Organizations will continue to look at benefits beyond compensation as an approach to fight employee attrition and keep costs across the labor force as balanced as possible.”  

But while CEOs and CFOs are resisting across-the-board salary increases in the near future, they may be taking a wait-and-see approach and could offer heavier compensation investments later, depending on how well they’re able to retain employees and how their company fares. A majority of respondents see permanent pay adjustments as a tactic for retaining talent, with 43% of respondents indicating they plan to deploy one-time bonuses to employees in addition to regular pay adjustments to retain talent, while another 39% saying they plan to fully or partially index pay adjustments to inflation.

 For now, top executives seem to want to hold the line against large-scale pay increases, and many employees who are counting on pay adjustments that fully compensate them for cost-of-living increases may be disappointed. “It’s clear that organizations are attempting to buy more time to read the tea leaves between persistently high inflation, the threat of recession and the state of the labor market before making significant strategic shifts,” Rathindran stated. 

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