The rise in inflation, interest rates and national insurance, along with the incoming price cap shift on energy bills is a significant cause of worry for many workers across the UK. That’s not even taking into account the increased costs that commuting motorists are paying to fill up their cars. It’s a myriad of factors that are making the cost of living crisis a real threat for the foreseeable future.
The cost of living crisis is affecting both employees and employers. Salaries are not keeping up with ever-increasing inflation rates, meaning that many employees are faced with spiralling financial worries and stresses. They are being forced to adapt to having less money as bills and expenses rise. Meanwhile businesses are struggling to absorb higher costs that cannot always be passed on to customers. Money worries can have serious negative impacts on employee productivity and engagement.
While it is easy to suggest that employers should just raise salaries to reflect the increasing inflation rates, many employers are not in a financial position to do so and offering higher remuneration alone does not solve all financial wellbeing worries.
With this in mind, now more than ever, employers need to take responsibility for their staff’s wellbeing and ensure that they are doing all they can to alleviate the pressure on them. This will not only leave more money in the pockets of under-pressure employees but will also show a commitment from the employer to the employee in terms of mental health at work and workplace wellbeing.
What can employers do to help support the financial wellbeing of their staff?
With no sign of the crisis easing, what can employers do now to ease the financial strain for workers? Some of these alternatives still have a cost to the employer, but may be more affordable than raising salaries substantially.
One-off cost of living payments
Instead of increasing salaries, a number of firms have offered bonuses to help staff cover the extra costs brought on by inflation and rising bills. While helpful in the short-term, a one-off payment will not address many of the longer-lasting challenges.
Flexibility around wages
Employers can adopt greater flexibility around their pay to staff. Employers with shift-based workers are increasingly using income streaming for instant access to earned pay. Concerns have been expressed around this as there can be transaction charges and doing so could just be delaying financial problems. But, it can be a way of enabling staff to manage their finances better and avoid expensive payday loans.
Flexible working
In addition to incentives and schemes, simply providing the ability for workers to earn their wages during their preferred working hours allows them to continue to thrive in their role and push for promotion opportunities, and this can typically be offered via flexible working arrangements.
Greater flexibility allows employers to alleviate the pressure on carers. This could entail the opportunity to work from home or flexibility with hours. There will be staff who can save costs by reducing their commuting into work by working from home and there may be others who want to reduce their household bills by being based in the workplace.
Employee across the economy have made a successful and productive switch to either hybrid, remote or flexible setups since the pandemic, enabling employees to provide value in the way that suits them.
Selling annual leave
If it’s approaching the end of the annual leave period and people have unused holidays that they don’t really want to take – subject to the employee having taken the statutory minimum days holiday – it could be an option to be able to sell that leave back to the employer and see an increase in their wage that month.
Offer company shares
Giving employees the option to buy shares thorough an Employee Share Scheme can be a tax-efficient way to invest and an alternative to a pay rise.
Introduce discount schemes and vouchers for employees
Companies may be able to offer employees a benefits package that helps salaries to go a little further every month. Examples of these include:
- employee rewards and perks;
- access to special discounts;
- health insurance; and
- budgets for expenses, including for childcare, transport, workplace lunches and gym membership.
These schemes and vouchers may cost employers some money, but the benefit to employees is usually greater than paying the cost as additional salary.
Salary sacrifice schemes
These schemes are tax-friendly incentive schemes that enable employees to save money when building their pension or buying products such as laptops and mobile phones in exchange for a reduction in their salary each month. Employees do have to accept that they will be paid less each month but it may help them manage their expenses if the money is going towards buying something they intended to purchase anyway.
The cycle to work scheme is another example of a scheme to which employers can sign up. It helps reduce the cost of employees buying a bike, especially when bike prices are increasing and supply is restricted.
Offer private meetings and sessions on money management
These can include advice on budgeting and saving, debt counselling and debt consolidation. There is no expectation that employers will have anyone within the company who is able to give this advice but it may be possible to arrange sessions with external third sector advisers. However, employers do need to be careful if considering introducing commercial financial advisers to their employees – appropriate due diligence is required and any arrangements between the adviser and the employer should be made very transparent.
Provide training to senior staff to support colleagues
If a group of senior staff are given the tools and knowledge about financial wellbeing, they will be better placed to discuss and help employees with financial concerns.
Charity options
For employees who are in debt, one option that can provide essential and cost-free assistance is to point them to debt-help charities. These include StepChange, MoneyHelper (formerly known as the Money Advice Service), and the Citizens Advice Bureau.
Reviewing profit share arrangements
Employers usually prefer a profit-sharing plan to wage increases or cost-of-living adjustments because the profit-sharing distributions are made only if a profit is earned—which means that the company is more able to afford the distribution.
Crisis loans
Employers could look to provide interest free crisis loans and season ticket loans for travel. Note that for ‘beneficial loans’, which are interest-free, or at a rate below, specific HMRC rules apply and you have certain National Insurance and reporting obligations.
Some businesses offer loan schemes or advances on wages, which may be tempting for workers looking for better pay. The employee will, however have to agree to pay back the loan amount and sign an agreement agreeing to the terms of repayment.
Communication and listening
A one-size fits-all approach to supporting staff is unlikely to be effective. Engage in communication with them, allow them to voice their concerns. Ensure staff are aware of the benefits and support you may already be providing. Normalising conversations about money worries, making a kind enquiry and listening to staff offload their concerns with empathy count as valuable support.
Need Assistance?
If you have any questions about staff pay and benefits and how to support your employees through the cost of living crisis, please contact our HR specialists.
How Employers Can Help With Cost of Living Crisis FAQs
What is the cost of living crisis, and how is it affecting employees?
The cost of living crisis refers to the significant increase in everyday expenses, such as housing, food, energy, and transport. Many employees are struggling to make ends meet due to stagnant wages and rising costs, which can lead to financial stress and reduced productivity at work.
What steps can employers take to support their staff during this crisis?
Employers can offer a variety of support measures, including financial assistance, enhanced benefits, flexible working arrangements, and access to mental health resources. Providing financial education and reviewing pay structures can also make a significant difference.
Is it legal for employers to provide financial assistance to employees?
Employers in the UK can legally provide financial assistance to employees. However, it’s important to ensure that any assistance is compliant with employment law and doesn’t inadvertently create tax or legal issues for the employee or the business.
How can flexible working arrangements help employees with the cost of living?
Flexible working arrangements, such as remote working or compressed workweeks, can reduce employees’ commuting costs and allow them to better manage their time, which can lead to savings on expenses such as childcare.
What kind of financial education can employers offer?
Employers can provide workshops or resources on topics like budgeting, saving, debt management, and financial planning. Partnering with financial advisors to offer personalised advice can also be beneficial.
Will offering additional support increase costs for employers?
While there may be some initial costs, offering additional support can lead to long-term savings by reducing staff turnover, improving productivity, and boosting employee morale. Investing in employee well-being often results in a more committed and engaged workforce.
How can employers measure the impact of their support initiatives?
Employers can track metrics such as employee retention rates, absenteeism, and overall productivity. Regular employee feedback through surveys or one-on-one meetings can also provide valuable insights into the effectiveness of the support provided.
Can small businesses afford to help their employees during the cost of living crisis?
Small businesses may face tighter budgets, but there are still cost-effective ways to support employees, such as offering flexible working hours, providing financial advice, or establishing a small emergency fund. Even small gestures can make a big difference to employees.
What role do benefits play in supporting employees during this time?
Enhanced benefits, such as increased pension contributions, healthcare coverage, or meal vouchers, can help alleviate some of the financial pressures employees face. These benefits can be a critical component of an employer’s support strategy.
How can employers ensure they are meeting their legal obligations when offering support?
Employers should stay informed about relevant employment laws and regulations, particularly concerning financial assistance and employee benefits. Consulting with legal or HR professionals can help ensure that any support offered is both effective and compliant with the law.
Glossary
| Term | Definition |
|---|---|
| Cost of Living Crisis | A situation where the cost of everyday essentials, such as housing, food, and energy, rises faster than wages, leading to financial strain for individuals and families. |
| Financial Assistance | Monetary support provided by employers to help employees manage financial difficulties, such as salary advances, loans, or subsidies. |
| Flexible Working Arrangements | Work arrangements that allow employees to vary their working hours or location to better manage their time and reduce costs, such as remote working or compressed workweeks. |
| Emergency Fund | A reserve of money set aside by an employer to assist employees in financial emergencies, often provided as an interest-free loan or grant. |
| Employee Benefits | Non-wage compensation provided to employees, which can include health insurance, pension contributions, and other perks like meal vouchers. |
| Pension Contributions | Contributions made by an employer into an employee’s pension scheme, usually based on a percentage of the employee’s salary. |
| Mental Health Support | Resources and services provided by employers to support employees’ mental well-being, such as counselling or stress management programmes. |
| Financial Education | Educational programmes or resources provided by employers to help employees manage their finances, such as budgeting and saving workshops. |
| Commuting Costs | Expenses incurred by employees when travelling to and from work, which can include public transport costs, fuel, and vehicle maintenance. |
| Employment Law | The body of law that governs the rights and duties between employers and employees, including regulations around wages, benefits, and working conditions. |
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
