How HR is Managing Rising Inflation in Startups & Scaleups

How HR is Managing Rising Inflation

Did you realise that the US and EU have the highest inflation rates in four decades? According to official statistics, consumer prices rose by 7% in December 2022 compared to a year earlier in the US, and by 5% in November 2022 in the EU. This means that everything from food to fuel to rent is becoming more costly every month.

Inflation is a problem for both consumers and businesses, particularly startups and scaleups that compete for talent and run on limited resources. How can HR managers manage the rising expense of living while maintaining the satisfaction, motivation, and loyalty of their employees?

In this blog article, we will offer some practical tips on how HR can manage rising inflation in startups and scaleups. We will discuss topics such as:

– How to adjust salary ranges and budgets to cope with inflation
– How to offer variable pay and equity compensation to motivate employees
– How to provide non-monetary benefits and perks to enhance employee satisfaction
– How to communicate transparently with employees about inflation

By complying with these recommendations, you will be able to create an inflation-proof compensation strategy that aligns with your company goals, culture, values, industry standards, market data etc.

This blog article will assist you in navigating one of the most important challenges of 2023, whether you are an HR manager or the founder of a startup or scaleup. Continue reading to discover more!

How to adjust salary ranges and budgets to cope with inflation?

How to adapt salary ranges and budgets to account for inflation is one of the greatest challenges facing HR managers in startups and scaleups. As the cost of goods and services rises, inflation implies that money’s purchasing power declines over time. This affects both employees and employers, who have to deal with higher expenses of living and operating.

Consumer prices increased by 7% in the US in December 2022 compared to a year earlier, and by 5% in the EU in November 2022, according to official statistics. This implies that every month, prices rise for everything from food to gasoline to rent.

If you want to retain your talent and remain competitive in your industry, you need to review your compensation plan regularly and make adjustments based on inflation rates, market data, industry trends etc. Here are some suggestions on how to do that:

  •  Track data on wage trends: A good way to start is by monitoring shifts in wages across your industry, region etc. You can make use of resources like salary polls and benchmarking tools. You will gain a better understanding of employee standards and pay rates from other businesses by doing this.
  • Expand scenario planning: Planning different scenarios based on various assumptions about inflation rates, company objectives, etc., is another helpful technique. Then, you can evaluate how each situation would impact your salary ranges and spending plans and choose the option that is most desirable or feasible for your business.
  • Expand geographical staffing range: By extending your regional staffing range, you can combat inflation. This involves hiring people from various regions where wages might be cheaper or more stable than your own. For your current workers who might want to move or cut their commuting expenses, you can also provide remote work options or flexible schedules.
  • Validate higher wages: You must get your workers’ approval before raising salaries based on market conditions, inflation rates, or other factors. You must be open and honest about the reasons behind your adjustments, their benefits, etc. In order to reward employees for their contributions, you must also make sure that your compensation plan and your performance management system are in sync.
  • Broaden ‘compensation’ definition: Finally, keep in mind that compensation includes additional advantages and perks in addition to monetary compensation that can raise employee happiness. You can provide non-cash incentives like opportunities for career advancement and recognition programs. Additionally, you can offer advantages like health insurance programs.

By following these tips, you will be able to adjust your salary range and budgets to cope with inflation and keep your employees happy, motivated, and loyal.

How to offer variable pay and equity compensation to motivate employees?

Employees can be motivated by variable pay and equity compensation, two types of remuneration that tie rewards to output and business success. A measurable financial reward, typically paid out over the course of a year, is what is known as variable pay. Equity pay is a portion of the company’s ownership that is granted in the future, typically over a number of years. In particular in competitive markets, both kinds of compensation can aid startups and scaleups in attracting, keeping, and motivating talent.

How to design variable pay schemes

Individual, team, or organizational objectives, or a combination of them, may be the basis for variable pay plans. Bonuses, commissions, profit-sharing programs, and incentives are just a few instances of variable pay structures. HR managers should take into account the following advice to create efficient variable pay schemes:

  • Align variable pay with the company’s vision, values, culture, goals, and budget
  • Define clear and measurable performance criteria and metrics
  • Communicate the variable pay scheme to employees transparently and frequently
  • Provide regular feedback and recognition to employees
  • Review and adjust the variable pay scheme periodically based on market data and employee feedback

How to offer equity compensation

Employees who receive equity compensation have a long-term benefit in the value and potential growth of the business. Different types of equity compensation are available, including stock options, restricted stock units, stock appreciation rights, and phantom stock. HR managers should take into account the following advice to successfully offer equity compensation:

  • Determine the eligibility criteria for equity compensation based on roles, seniority, and performance
  • Decide on the type, amount, and vesting schedule of equity awards
  • Educate employees on the benefits, risks, and tax implications of equity awards
  • Communicate the equity compensation plan to employees clearly and regularly
  • Monitor and evaluate the impact of equity awards on employee motivation, retention, and alignment

Employee motivation in startups and scaleups can be effectively achieved by HR managers using variable pay and equity compensation. HR managers can develop a culture of performance and ownership that promotes company success by carefully designing these compensation plans and sharing them.

How to provide non-monetary benefits and perks to enhance employee satisfaction?

Depending on the type of reward and the employee’s success, non-financial perks and benefits can be offered in a variety of ways. Examples of how to offer bonuses and non-cash compensation include:

  • Flexible working: Allow employees to choose their work hours and location based on their personal and professional needs1
  • Additional time off: Reward employees with extra paid or unpaid leave days for exceptional performance or special occasions1
  • Learning and development: Offer employees access to online courses, mentoring programs, coaching sessions, or conferences that can help them grow their skills and knowledge1
  • Recognition programs: Acknowledge employees for their contributions through public praise, thank-you notes, certificates, or badges21
  • Experiential rewards: Surprise employees with fun or meaningful experiences such as movie tickets, spa vouchers, dinner reservations, or charity donations21
    Wellness initiatives: Support employees’ physical and mental health through fitness memberships, health screenings, meditation apps, or counseling services1

In startups and scaleups, non-cash benefits and perks are effective ways for HR managers to raise employee happiness. HR managers can develop a culture of gratitude and recognition that fosters employee loyalty and productivity by selecting and offering these rewards with care and creativity.

How to communicate transparently with employees about inflation?

Over time, inflation is defined as a rise in the average level of prices for products and services. Because it lowers the purchasing power of money and raises the cost of manufacturing, it has an impact on both consumers and businesses. Because it reduces the actual value of employees’ salaries and benefits, inflation can also have an effect on their motivation, engagement, and retention.

Maintaining alignment, fairness, and confidence in the workplace depends on open communication with the workforce about inflation. The following advice for successful communication is for HR managers to take into account:

  • Explain the causes and effects of inflation on the company and its products or services
  • Share how the company is managing inflation through pricing strategies, cost-cutting measures, or innovation initiatives
  • Address employee concerns about pay fairness and compensation adjustments
  • Provide alternative rewards and incentives that are not pay-related, such as learning and development opportunities, career pathing, recognition programs, or wellness initiatives
  • Communicate early and clearly through multiple channels and formats
  • Prepare managers to have honest and empathetic conversations with their direct reports about pay
  • Solicit feedback from employees and listen to their suggestions and expectations

Communicating transparently with employees about inflation is a key challenge for HR managers in startups and scaleups. By following these tips, HR managers can foster a culture of openness and transparency that supports employee satisfaction and performance.


Startups and scaleups are impacted by inflation in many different ways, particularly when it comes to attracting and keeping talent. To combat inflation and maintain their workers’ motivation and satisfaction, HR managers must implement effective strategies.

In this blog post, we have covered four HR strategies that can help you deal with inflation:

  • Adjusting salary ranges and budgets based on market data and inflation rates
  • Offering variable pay and equity compensation to incentivize performance
  • Providing non-monetary benefits and perks to enhance employee well-being
  • Communicating transparently with employees about inflation

You can make sure that your startup or scaleup retains market competitiveness, builds a strong employer brand, and promotes a positive workplace culture by putting these strategies into practice.

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