Increasing wages can create a more competitive situation for employers

By: Trademagazin Date: 2023. 05. 05. 11:04

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Last year, the companies decided to increase wages higher than planned, but the employees generally expected a higher amount. In order to retain the workforce, companies often raised wages and benefits twice or not infrequently three times in 2022. How should employee engagement be improved in the current situation? In what form should employers respond to the increasing burdens of employees? – among other things, the latest broadcast of the Profession.hu Backstage podcast seeks answers to these questions.

Roughly eight out of ten Hungarian companies implemented some form of wage improvement last year. No wonder, since this is the strongest motivating factor among employees when changing jobs. Increasingly frequent wage increases can intensify competition between companies.

The problem of the wage spiral

As security and stability become more and more a priority for employees, an increase in the basic salary is most often considered satisfactory, according to the research carried out by Profession.hu in February 2023.

“Increasing basic wages is the riskiest form of compensation from the point of view of companies, because it often means a long-term commitment: if a company exceeds the increase, it must continue to count on this expense, and in most cases the answer to its replacement is a price increase – thus consumers’ spending also rise, which increases the employee’s demand for additional wage compensation. Non-salary or one-off financial benefits provide companies with much greater flexibility in the future, they can be changed more easily, but they can have a significant impact on the well-being of employees if the employees are basically satisfied with the basic salaries”.

– said Lili Simon-Göröcs, HR director of Profession.hu.