How Can You Support Employees in a Cost of Living Crisis
A large proportion of people and businesses have been impacted by the ‘cost of living crisis’ which has been extensively covered in the news over recent months. This term refers to the fall in ‘real’ disposable incomes – after tax…
Blog29th Sep 2023
A large proportion of people and businesses have been impacted by the ‘cost of living crisis’ which has been extensively covered in the news over recent months. This term refers to the fall in ‘real’ disposable incomes – after tax and benefits and adjusted for inflation – that the UK has experienced since late 2021.
The crisis is being caused predominantly by high inflation outstripping wage and benefit increases, and has been further exacerbated by recent tax increases. Energy prices have also been significantly increased, which has affected both employees and businesses.
This article will discuss how this might impact employers and suggest ways that businesses can provide a supportive environment for employees during this difficult period.
Why is it important for employers to address this crisis?
Individuals are facing lots of financial uncertainty around general living costs. This includes potential increases in mortgage rates and rent, as well as high energy costs and increases in food prices etc. In short, employees have less money to spend on basic amenities. For example, 91% of adults have reported an increase in living costs compared with this time last year and almost 75% have reported increases in the past month alone. Furthermore, 44% of adults who are responsible for energy bills are finding it difficult to meet payments and 28% of people who are responsible for mortgage or rent costs feel the same. This means that many people will likely be facing significant financial challenges in the coming months, particularly as we move into winter when energy usage will be higher.
As a result, employees are likely to be worried, and this worry will not leave them when they enter the workplace. If employees are worried, they will be distracted, and distraction and worry can lead to low morale across the workforce. This can have a significant negative impact on engagement. All of this together is likely to lead to lower productivity. Which ultimately affects the company’s bottom line and in tough times, it will be difficult for employers to sustain this.
Normally employers wouldn’t get involved in employee finances. But when things start to impact the financial health of the business, it is important to act. This article will provide some practical tips on how employers can support employees through this crisis.
How can employers help?
Employers can support employees through a cost of living crisis in several ways which are summarised below in 3 key points:
- Direct financial intervention:
The obvious way to assist employees would be to provide financial support. This may involve implementing a salary increase at a higher percentage increase than usual, alternatively implementing more frequent, gradual pay rises throughout the year. This would bridge the gap between employees’ salaries and inflation. However, businesses may need to consider whether this is a sustainable option for their organisation. Cost of living bonus payments can also be provided to employees, with caution that this bonus does not impact any benefits received by lower earners.
- The second is indirect financial intervention.
This type of intervention will have financial cost to the business but are not necessarily translated into money being deposited into an employee’s bank account. This may include the introduction of employee benefits that offer cost-saving opportunities such as salary sacrifice schemes, season ticket loans, subsidised food or drink.
- The third category is other support mechanisms which covers non-financial benefits or other means of supporting employees that don’t necessarily have a financial impact on the business. This could include hybrid working options or financial education.
We understand that one of your most important elements is your people and that sometimes managing people can come with its own challenges. If we can help you to better support your people please do not hesitate to get in contact with or a member of our HR & Employment Law Team.