One question that is gaining more attention in employee surveys recently is, “I am paid fairly for my contribution to the company.” For many companies, it’s become a critical driver of engagement and retention. A customer I work with recently experienced a six-point improvement on this question between 2022 and 2024 — a remarkable achievement in the current economic climate. I’ve consistently pointed out to their leadership just how rare this kind of progress is, especially as financial pressures increasingly weigh on the workforce.
At a recent leadership conference, I spoke about how compensation has shifted in the minds of employees. In the past, many workers evaluated their pay against the difficulties they tolerated in their jobs, with responses that amounted to, “I’m not paid enough to put up with [blank].” Maybe it was a lack of resources, work/life balance, or access to growth opportunities, but it was rarely about the money.
In fact, across dozens of organizations, we found zero correlation between how employees responded to that question and the actual dollar amount they were paid. For organizations that tried to address the issue from a purely financial perspective (without also addressing the other underlying issues), they often saw a short-term bump, but within six to nine months the other experiential factors left employees just as frustrated (albeit making slightly more money). Now, the conversation has changed. Workers are increasingly saying, “I’m not paid enough to maintain my standard of living.” And this shift is at the heart of the financial pressures facing workers and their leaders today.
The Impact of Inflation on Employee Stress
Despite news reports celebrating the cooling of inflation, many employees still feel financially strained. The real problem is that while inflation may be easing, the cumulative cost of living has risen by 20–25% over the past three years, according to the U.S. Bureau of Labor Statistics. Meanwhile, wage growth hasn’t kept up with inflation, as highlighted by the Economic Policy Institute. This disparity explains why so many workers feel like they’re barely keeping their heads above water.
This economic squeeze has contributed to significant shifts in employee behavior. During the Great Resignation, employees left jobs in search of better pay and benefits, as noted by Harvard Business Review, leveraging inflationary pressures to secure better pay. However, as companies’ weighted average cost of capital (WACC) has risen, organizations have felt the need to cut costs. Hiring has slowed, layoffs have increased, and many workers now feel stuck in their current roles. For many, the promise of a raise, let alone one that outpaces inflation, feels increasingly out of reach.
Why Pay Feels More Important Than Ever
Compensation has always been a key factor in employee experience, but it’s not usually the sole reason someone leaves a job. More often, people quit when they feel their experience in the workplace doesn’t align with their expectations. However, when workers feel that their pay doesn’t even cover basic living expenses, pay itself begins to tip the scales. For many, the rising cost of essentials — housing, healthcare, childcare, food — adds new urgency to the demand for fair compensation.
The result is a workforce under immense financial strain. Many employees feel they’re working harder just to stay in place, and for some, even that isn’t enough. These pressures affect not just lower-wage employees but workers across the income spectrum. This reality is forcing leaders to rethink how they approach compensation, benefits, and overall employee well-being.
How Leaders Should Approach the Issue
So, how should leaders think about the financial pressures facing their employees today? First, it’s important to acknowledge the reality of the situation. Many workers are feeling the effects of years of stagnant wages, rising costs, and, now, the prospect of an economic downturn. By recognizing this, leaders can take steps to address employee concerns in a meaningful way.
- Engage in Active Employee Listening: One of the most effective ways to understand employees’ financial stress is through robust employee listening. This means going beyond surface-level, off-the-shelf surveys and conducting in-depth, always-on conversations to uncover how compensation, workload, and financial stressors are impacting employees. Are workers feeling that their pay aligns with their contributions? Do they have concerns about financial security? Implementing a multi-channel solution like Perceptyx's People Insights Platform can prove helpful for making data-driven decisions that address these concerns.
- Use Data to Identify and Eliminate Low-Value Activities: As financial pressures increase, leaders should also look inward at organizational processes. Are there tasks or activities that are taking up time but not adding real value? By leveraging employee listening insights to identify and eliminate low-value activities, companies can redirect resources toward more productive efforts. This can help create more room in the budget for wage increases while simultaneously allowing employees to focus on higher-value work.
- Empower Employees to Add More Value: Beyond eliminating inefficiencies, leaders can also help employees increase the value they bring to the organization. Offering development opportunities, cross-training, and pathways for advancement can boost engagement and productivity. In turn, employees who feel more valued are more likely to see their work as a mutually beneficial relationship with their employer, even in times of financial strain.
- Revisit Compensation Strategies: Now more than ever, it’s crucial for organizations to revisit their compensation strategies. While many companies may feel pressured to cut costs, competitive compensation is critical to retaining top talent, especially when financial pressures outside of work are mounting. This might mean offering more creative compensation packages that include benefits like wellness programs, financial planning services, or flexible work options.
- Help Employees Plan for Financial Success: Lastly, providing financial wellness resources can be a game-changer for employees feeling the pinch. Whether it’s offering workshops on budgeting, access to financial advisors, or tools that help employees plan for long-term financial goals, supporting employees in this way can make a tangible difference in their financial stress levels. Employees who feel more secure about their economic future are more likely to be engaged and productive in their roles.
Perceptyx Can Help You Understand Pay and Performance in a Shifting Economy
The financial pressures facing today’s workers aren’t going away anytime soon. As inflation continues to affect everyday costs, wage stagnation will remain a concern for many. Leaders who take proactive steps to engage with their employees, streamline operations, and offer competitive compensation packages will be better positioned to retain their workforce and maintain a positive culture.
By fostering a workplace where employees feel heard, valued, and supported, organizations can help their teams navigate these challenging financial times and remain committed to their work. In the end, the question isn’t just about pay — it’s about how organizations can create a holistic experience that allows employees to thrive, even when external economic pressures mount.
An experienced listening partner like Perceptyx can help you gain deep insights into your employees' compensation challenges and concerns. Don't let financial stress impact your workforce — schedule a meeting with a member of our team today to learn how Perceptyx can help you create a more financially secure and engaged workforce.