Supporting Employees Through Inflation: Practical Strategies for Leaders
When inflation rises faster than the average 3% wage increase*, employees often feel the financial strain quickly. This situation can often cause employers to see declines in employee morale and productivity, as well as receive more off-cycle raise requests.
While increasing base pay isn't always feasible, there are practical steps leaders can take to support employees and maintain engagement during these periods.
Rena Somersan, Newport’s Compensation Consulting Managing Principal, shared three key actions to ease the pain of the situation (both for the employer and employees) without compromising the organization’s fiscal health.
Communicate openly and lead with empathy
When employees are feeling the effects of rising costs, clear and direct communication matters more than ever.
“Leaders, and preferably the CEO, must message the bitter pill here,” Somersan said. “There is cost of living and there is cost of labor, and as a company, we only have the lever of cost of labor in our control. The cost of living is something that happens outside of a company’s control base on economic and geopolitical pressures.”
Avoiding the topic, or worse, continuing to deliver messages focused on culture and employee value can harm employee productivity exactly when employers need it to rise.
Instead, Somersan recommends leading with empathy.
“Acknowledge the financial pain employees likely feel and remind them that the organization is feeling the pinch, too,” she said. “Be direct about increases to goods or services costs. Let them know if pricing power has been affected.”
At the same time, it’s important to provide reassurance.
“Be sure to reassure employees of the organization’s overall health,” she noted. “And as you can, share strategies that leaders are taking to withstand the inflationary pressure.”
Offer flexible alternatives to salary increases
There are many ways outside of base salary compensation increases that employers can use to help ease inflation’s bite. More than 50% of employers said they planned to increase use of incentives to drive performance, according to Newport’s 2025/2026 Compensation, Retirement, and Benefits Trends Report.
For example, some employers are giving out more “spot” performance awards—one-time bonuses that recognize exceptional contributions. “That’s a great way to recognize top performers for exceptional efforts and outcomes, in addition to helping them cope with higher costs,” she said.
Employers are also exploring more flexible approaches to support employees’ day-to-day needs. “We’ve seen some employers offer gas stipends to help offset the cost of commuting,” Somersan said. “Others have pushed back Return to Office (RTO) mandates or added more work-from-home days.”
These types of targeted, flexible rewards can help bridge the gap when higher base salary increases aren’t an option.
Provide support for essential, everyday expenses
Rising costs for essentials, especially food and transportation, can have a significant impact on employees’ financial well-being. “Some employers have offered grocery-store or restaurant gift cards,” said Somersan, “similar to providing gas cards as prices at the pump peak.”
Bringing in co-operative food vendors or local farmers is another possibility. “We’ve seen some organizations even purchase fresh produce or eggs directly from a farmer and then have employees take home the selections,” she said.
Somersan pointed out that supporting local restaurants, food co-ops, or farmers are all great ways to support the communities where employees live, as well as the employees themselves.
Supporting employees through inflation can strengthen engagement
Periods of high inflation can lead to a more cautious workforce, with employees holding tightly to their roles—also known as job hugging—rather than actively engaging in them.
But there’s a meaningful difference between employees who feel stuck and those who feel supported.
Taking steps to communicate transparently, offer flexible rewards, and help offset essential expenses can reinforce trust and demonstrate commitment to employee well-being. In turn, organizations may be better positioned to maintain engagement, productivity, and retention—even in challenging economic conditions.
And when conditions improve, those efforts can help create a stronger foundation for long-term success.
Key takeaways
- Communicate with honesty and compassion—Now is the time to show your corporate values.
- Offer more flexible types of financial awards—Spot awards and performance bonuses can help motivate employees to perform through tough times.
- Go outside the traditional compensation box—Working with local businesses to supply food, fuel, or other items helps employees and the community where they live, too.
Facing this challenge? Newport can help
Supporting your employees through inflationary pressures without compromising your organization’s fiscal health doesn’t have to be daunting. Newport’s Compensation Consulting team has helped many organizations from start-ups to billion dollar firms navigate this situation. They can provide you with practical ideas that work.
Contact us today to discuss ways to help ensure your compensation strategy sets your organization and your employees up for success.
*Source: Newport 2025/2026 Compensation, Retirement, and Benefits Trends Report
