The Impact of Inflation – IRS Makes Mid-Year Mileage Reimbursement Adjustment as Employers Implement New Wage Strategies to Retain Workers | Blogs | Labor and Employment Law Perspectives

Inflation is at its highest level in 40 years – hitting 8.6% in May, according to a Bureau of Labor Statistics (BLS) press release issued earlier this month. Rising consumer product costs, including food and gasoline, all contributed to this increase. For the most recent one-year period (May 2021 – May 2022), the CPI (consumer price index) increased by around 8.3%, with food up more than 10% and l of a whopping 48.7%!

This rate of inflation affects both employees and employers. Workers are of course finding it increasingly difficult to make ends meet. Meanwhile, employers operating in a tight labor market face demands for higher wages while coping with their own price pressures.

Fuel prices are a particular concern, and the federal government has recently taken steps to help workers who incur automobile expenses as part of their job.

Specifically, the Internal Revenue Service (IRS) released Announcement 2022-13 this month, which increased the standard mileage reimbursement rate to the highest ever announced by the agency: 62.5¢ per mile. . This is the first time in more than a decade that the IRS has made a mid-year adjustment to the refund rate; the new rate comes into effect on July 1 and the old rate (58.5¢/mile) applies for the period from January 1, 2022 to June 30, 2022.

Unfortunately, simply reimbursing employees for their travel expenses is not likely to retain top talent; rather, employers should consider other compensation adjustment strategies to maintain the workforce needed to remain competitive in the marketplace. Some of these strategies are described below.

  1. Mid-year salary increases – This is not the first time, but on a much more universal scale, that employers have made mid-year wage adjustments for their workforce. As noted above, employees face historic (at least lifetime) increases in CPI. Additionally, unemployment rates are extremely low – with nearly two jobs available for every person currently unemployed. As a result, employees are making job changes at rates not seen in the past: 4.5 million people left their jobs in March knowing that other opportunities were available to them.

    Not surprisingly, the primary determinant of most job changes is compensation. According to a recent employee survey reported by Grant Thornton in its State of Labor in America report, 37% of employees who left their job for another opportunity did so because of a raise. To help meet this challenge, many employers have reassessed compensation budgets and implemented mid-year increases.

    Certainly, such increases need not be implemented universally; however, to attract and retain talent – ​​at least for business-critical roles, a mid-year increase communicates this value to employees.

  2. Lump sum – For employers with a large hourly workforce, and where a mid-year salary increase may not seem so attractive, many have turned to “recognition” and “appreciation” bonuses. Similar to the “hazard” pay awarded at the start of the COVID-19 pandemic, these lump sum awards tend to be welcomed by hourly paid employees. Further, as the Department of Labor (DOL) explains in its Fact Sheet No. 56C, where the bonus is truly “discretionary”, it is not subject to inclusion in the normal rate of pay for employee and therefore does not affect overtime pay calculations. and responsibility.
  3. Improved benefits and opportunities – As reported in State of Labor in America, after salary/compensation, the next two most important reasons identified for changing jobs were opportunities for increased benefits (other than health and retirement) (18%) and improved job opportunities. advancement (27%). Recognizing these factors as drivers of hiring, more than ever before, employers have been intentional in designing growth and advancement training for their employee population and, more importantly, have been very forthcoming in about these programs (both for current employees and candidates). An optimistic view of upward mobility and opportunities for professional and individual growth creates a very positive employee community and an excellent reputation for any employer who is seen to offer these opportunities to their current employee population.

Likewise, unique benefits, such as 4-day work weeks, remote work opportunities, enhanced paid time off (needed to help some parents when school closures repeat) and various other perks make opportunities attractive jobs for some. (Remember, however, that depending on the benefits, those benefits may or may not need to be included in the employee’s W-2.) The goals should be to create a work environment that is rewarding and in which employees feel comfortable. valued. These feelings can go a long way in eliminating the “I can do better elsewhere” feeling when there are two jobs for every unemployed person.

Unfortunately, high inflation may not be abating any time soon, so the constant pressure to improve benefits and increase compensation is not waning. Employers are currently facing an increasingly difficult labor market, with employees having the “power” to exercise free mobility more than ever before in recent history. Employers who are “waiting” to see how inflation might deteriorate are likely to be left on the sidelines looking for workers. Employers who are more nimble with their various employee packages (including increasing salaries) are likely to find the best candidates, and With a bit of luckthose who will stay longer.


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