• FREE RESOURCES
        • Accounts Payable
          Finally! The trick to securing greater T&E compliance
          Benefits
          Rooting out folks who don’t belong on your health plan: A 6-point dependent audit checklist
          IT
          3 costly misconceptions about biz email compromise
          Credit and Collections
          Collecting via email: 4 must-make moves in your subject line
          Accounts Payable
          5 Tough-to-spot signs that an invoice is fake
  • PREMIUM CONTENT
        • Staff management
          120 Proven Communications Tips for Today’s CFO
        • Payroll
          Handling Nonexempt Employee Pay: Stay Compliant and Avoid DOL Audits
          Accounts Payable
          T&E Best Practices: Complete Guide to Ensure Compliance
          Payroll
          Payroll Best Practices: 4 Ways to Save Time and Money
        • Staff management
          Email Best Practices: A 6-Question Quiz
          Staff management
          Innovative Communications Strategies: An Email Case Study
          Staff management
          A 5-part Framework for Successful Workplace Communications
        • SEE MORE
          PREMIUM RESOURCES
  • CORONAVIRUS RESOURCES
  • LOG IN
  • SIGN UP FOR FREE

Resourceful Finance Pro

  • FREE RESOURCES
        • Accounts Payable
          Finally! The trick to securing greater T&E compliance
          Benefits
          Rooting out folks who don’t belong on your health plan: A 6-point dependent audit checklist
          IT
          3 costly misconceptions about biz email compromise
          Credit and Collections
          Collecting via email: 4 must-make moves in your subject line
          Accounts Payable
          5 Tough-to-spot signs that an invoice is fake
  • PREMIUM CONTENT
        • Staff management
          120 Proven Communications Tips for Today’s CFO
        • Payroll
          Handling Nonexempt Employee Pay: Stay Compliant and Avoid DOL Audits
          Accounts Payable
          T&E Best Practices: Complete Guide to Ensure Compliance
          Payroll
          Payroll Best Practices: 4 Ways to Save Time and Money
        • Staff management
          Email Best Practices: A 6-Question Quiz
          Staff management
          Innovative Communications Strategies: An Email Case Study
          Staff management
          A 5-part Framework for Successful Workplace Communications
        • SEE MORE
          PREMIUM RESOURCES
  • CORONAVIRUS RESOURCES
  • Accounts Payable
  • Credit and Collections
  • Payroll
  • Accounting
  • Benefits
  • Finance Technology
  • Sales & Use Tax
  • More
    • Employment Law
    • Strategy
    • Policy and Culture
    • Fraud
    • Budgeting and Forecasting
    • Banking
    • Staff Management
    • Cost Control
  • Payroll
  • Strategy
2 minute read

Will cost of living, inflation impact how your firm sets employee pay?

Brian Bingaman
by Brian Bingaman
June 3, 2022
  • SHARE ON

An ongoing battle for your peers continues to be setting salary budgets and whether the cost of living or cost of labor should be considered in their compensation philosophy and strategy.

When COVID lockdowns made remote work mandatory, firms – especially those in the technology industry – started questioning whether employees that relocate to an area with a lower cost of living should continue to be paid at the same rate.

Flash forward to the current high rate of inflation, and once again one of the hottest topics of conversation is whether the cost of living should play a role in determining pay.

According to April 2022 data from the World Economic Outlook Database, Consumer Price Index statistics indicate an average inflation increase of more than 5% over the previous year – the highest in 15 years.

It’s a gap that’s hard to ignore. And slowing down or eliminating pay increases under these conditions may not seem like wise decisions. However, if inflation becomes a driver of pay, there should be a plan for what happens when inflation rate levels eventually go back down to where they were.

Cost of living v. cost of labor

Finance leaders are more likely to be paying attention to the cost of labor, or the total amount that a company spends on its employees, including benefits, compensation and payroll taxes. It’s important to ensure that the cost of labor doesn’t drastically affect company profits.

The experts at Indeed say the cost of living (e.g., housing, food, health care, clothing, transportation) and cost of labor can actually be used together to analyze what the most competitive wages/salaries are for your industry or region.

“Knowing the cost of living in your area allows you to offer competitive wages for those who may live there and work with your company,” said a post on Indeed’s website.

Meanwhile, the experts at Mercer believe that some industries will have to make pay decisions for certain jobs based on recruiting competition from a larger national labor market.

“Before making any changes, organizations will need to build their capabilities and methodology to determine which jobs should be paid” based on local cost of living/cost of labor versus a national pay structure, Mercer partner Tauseef Rahman said in an online post.

It may take calculating several sets of cost of living and cost of labor figures to make the best spending decisions to improve employee satisfaction and boost business performance.

Brian Bingaman
Brian Bingaman
Brian researches and writes about accounts payable and CFO management trends. He was a newspaper journalist in suburban Philadelphia for nearly 20 years.

Get the

Resourceful Finance Pro Logo

Newsletter

With Resourceful Finance Pro arriving in your inbox, you will never miss critical stories on accounting, benefits, payroll & employment law strategies.

  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • This field is for validation purposes and should be left unchanged.
Resourceful Finance Pro Logo
  • ABOUT
  • CONTACT
  • WRITE FOR US
  • ADVERTISE WITH US
  • Accounting
  • Benefits
  • Payroll
  • Policy and Culture
  • Employment Law
  • Fraud
  • Finance Technology
  • Sales & Use Tax
  • Accounts Payable
  • Credit and Collections
  • Strategy
  • Budgeting and Forecasting
  • Banking
  • Staff Management
  • Cost Control

Resourceful Finance Pro, part of the SuccessFuel Network, provides the latest Finance and employment law news for Finance professionals in the trenches of small-to-medium-sized businesses. Rather than simply regurgitating the day's headlines, Resourceful Finance Pro delivers actionable insights, helping Finance execs understand what Finance trends mean to their business.

Privacy Policy | Terms of Service
Copyright © 2023 SuccessFuel

WELCOME BACK!

Enter your username and password below to log in

Forget Your Username or Password?

Reset Password

Lost your password? Please enter your username or email address. You will receive a link to create a new password via email.

Log In

During your free trial, you can cancel at any time with a single click on your “Account” page.  It’s that easy.

preloader