The cost-of-living crisis encompassing higher heating and electricity costs and spiralling inflation, has affected employees and employers globally. Employers have seen the prices of raw materials and business energy costs skyrocket, combined with the need to help their employees contend with the effects of the cost-of-living crisis.
Recruitment and staff retention is another issue facing employers. In the current candidate-driven market, organisations are struggling to find the talent they need and can afford. As a result, businesses have to be inventive to retain staff, helping them navigate the burden of the cost-of-living crisis in a way that is affordable and helpful to their employees.
Historically, high inflation hits the lowest-paid workers the hardest; however, the current rise in inflation has added to the pressure households are already experiencing. According to data from Citizens Advice, 38% of low-paid workers are falling behind on their household bills.
A recent poll by CIPD found that the financial insecurity suffered by over a quarter of employees directly impacted their performance at work, and a further 20% lost sleep due to money worries.
Women are more likely to suffer this type of stress as men tend to receive pay raises that align with the rising cost of living. In fact, only 14 % of women, compared with 22% of men, will have received a pay rise that was in line with or exceeded the current inflation rate.
Though wages have risen in recent months, the pay increases offered by employers have failed to keep pace with inflation.
Realistically employers don’t have a bottomless pot of money that will allow them to keep increasing wages as inflation rises, so what else can they do?
Five ways businesses can support their employees during the cost of living crisis
1. The real living wage and salary increases
Historically, the people most affected by high inflation rates tend to be the lowest-paid workers. Though the national minimum wage is mandatory, the real living wage is voluntary and applies to workers over 18 years old. The hourly rate for London is £11.05, and for the rest of the UK, it is £9.90.
Real living wages are higher because they are calculated independently and based on what people need to achieve a minimum standard of living.
Salary increases in the current climate are going to be welcome by all employees. However, consider offering a slightly higher percentage increase to lower-paid workers, as this will have a disproportionately more significant impact than a similar across the board.
Allied Vehicles Group, based in Glasgow, has given its employees a sliding scale pay increase that is weighted towards its lower-paid staff. The lowest paid will receive a salary increase of 10%, while higher-paid employees will be awarded a 5% increase.
2. Salary Sacrifice schemes and one-off payments
Salary sacrifice schemes sound counterintuitive; who wants to have less money rather than more? However, these schemes are a good way of providing valuable benefits to employees, such as annual travel cards, childcare vouchers, or cycle-to-work schemes.
The cost of these schemes is deducted from the employee’s salary each month, but the amount deducted is taken from gross pay rather than net pay, so the cost to your employee is tax-free. This helps to spread the cost of expensive items like season ticket loans over several months and can help your employees manage their money.
For many businesses, even large, well-established organisations, a pay rise in line with inflation may be unaffordable. However, to help with the rising cost of living, many companies are giving their employees one-off payments.
Virgin Media O2 are giving payments of £1,400 to employees earning less than £35,000 spread over several months. Rolls Royce has offered a £2,000 cash payment to its 14,000 employees along with a 4% backdated pay rise. Though they are aware that the pay rise is well under the current inflation rate, the cash payment is an acknowledgement of the current economic situation. It is hoped the cash payment will bolster loyalty and help attract new talent to the business.
3. Financial well-being assistance and education
The Money Advice Service reported recently that up to 39% of adults in the UK aren’t confident in managing their money, and 11.5 million have less than £100 in savings. To show commitment to helping your employees navigate the current cost of living crisis, implementing a financial well-being policy could make a big difference.
Signposting where your staff can access money and debt guidance and ensuring they are aware of the benefits you offer to your employees. Additionally, showing them how to access apps like Moneyhub, which can help them manage their finances, can go a long way towards them feeling confident and in control of their money.
Consider providing financial education in the workplace; it can help your employees see beyond the doom and gloom headlines in the press and reduce their fear and anxiety around money.
Research by Nudge identified that 68% of people whose employer doesn’t provide any type of financial education would welcome it. These education programmes can provide essential budgeting, saving and debt management lessons, significantly impacting their finances and well-being.
4. Hybrid working to reduce travel costs
Since the Coronavirus pandemic and associated lockdowns in 2020 and 2021, hybrid working has become a feature of business life. During the current cost of living crisis, offering your employees the option of working from home to reduce travel costs could help them save money.
However, working from home may be more expensive for some employees given the high energy prices and opening the office to allow them to continue working there can help with budgeting and their personal finances.
5. Discounts, vouchers, and selling unused holidays
In addition to pay raises and one-off payments, a number of organisations are providing more tangible benefits for their employees.
Some employers are providing free food and snacks to help their employees cope with the cost-of-living crisis. As an example, John Lewis and Waitrose are offering free food over the winter, and Sainsbury’s is giving access to basic food items while on shift.
Employee discounts can make a big difference as part of an overall benefits package. Tesco has raised its Clubcard discount allowance for employees from £1000 to £1500, which means employees can get a 10% discount on their shopping, jumping to 15% on payday weekends.
Asda has removed its 12-week qualifying period for access to its 10% staff discount, and there’s no cap on spending. Iceland has also increased its staff discount from 10 to 15%.
Finally, some employers allow employees to buy and sell their holiday days at specific times of the year. If you don’t expect to use all your holiday, you may be able to sell some back to your employer and get paid instead.
During the current cost of living crisis, it’s possible to help your employees in many ways other than pay raises to cope with spiralling inflation and high energy prices. Thinking outside the current options and looking at innovative ways to help will boost staff loyalty and maintain their everyday productivity.