How can employers respond sustainably to the cost of living crisis?
Rebecca Dixon is head of HR consultancy at Progeny.
With what has been termed as the worst cost of living crisis in a generation continuing to bite, employers are increasingly being looked to for additional financial support.
Two-thirds of UK businesses say more employees are asking for pay rises according to recent research yet inflation beating pay rises are simply not feasible for the vast majority of employers and a quarter of businesses say they cannot continue to raise pay because of instability, according to data from Robert Half.
Many larger employers, including Amazon, HSBC, John Lewis and King Charles, have made headlines by granting one-off cost of living payments, however with the Bank of England warning that the UK is facing its longest recession since records began, it’s important that companies are increasingly looking to sustainable solutions and not one-off fixes, to help increase their teams’ financial resilience and retain and attract talent.
How measures like cost of living payments are allocated could additionally give rise to issues around fairness if only granted to certain eligible staff, with take home pay far from being the only indicator of financial wellbeing.
However, there are a variety of ways that employers of all sizes can help to increase the money in people’s pockets and embed a stronger financial foundation.
Diversify your benefits
Employee benefit schemes help people’s incomes go further with incremental steps that companies can take, without incurring significant costs.
Schemes that provide employees with access to discounts on products and services fall outside of the traditional definition of employer-provided benefits such as pensions, holiday and medical insurance, but can make a positive difference to employees’ outgoings. These can either be run via a third-party supplier, with a cost per person, or companies can look at operating this in-house, by negotiating directly with local retailers and businesses.
Salary sacrifice schemes have also grown in popularity as an efficient and cost-effective method of paying for employee benefits, with seven out of ten UK pension schemes using it as the default method of making contributions (Aon Benefits & Trends Survey). Childcare, technology and low emission vehicle schemes, gym memberships and the Government’s Cycle to Work schemes are further examples, with tax and national insurance savings available.
Interest-free loans for things such as travel season tickets are a further way that companies can help employees reduce large outgoings in the current climate.
Firms will need to understand the tax and reporting implications for all of these options of course, seeking professional advice where necessary.
It’s also possible to look at this from the other way round and companies with an existing benefits package could explore converting elements of these benefits into cash.
Introducing a holiday buy and sell scheme for example allows employees to convert a certain portion of unused holiday to cash, over and above their statutory leave entitlement (taxed the same as standard pay).
Employers can also consider introducing mechanisms such as a referral bonus payment scheme, to team members who introduce potential candidates to their company and are subsequently employed for a set period of months as a result.
It’s also good practice for companies to review their expenses, leave of absence and family friendly policies and procedures, to make they are fit for purpose in the current economic climate, well signposted and easy for employees to successfully interact with.
Offer financial education
One in two adults in the UK don’t feel confident in managing their money day to day, according to the Money and Pensions Service’s Financial Wellbeing Survey 2021. Employers can therefore help play an important role in financial education and support, to help their employees make, better, more informed decision about money and ensure they are getting all the support they are entitled to.
Help for Households, Money Helper, The Money Charity and MoneySavingExpert are just a handful of great resources out there in relation to cost of living support, debt, benefits, budgeting and finances.
Employers can also signpost useful platforms for obtaining the best prices on everyday essentials such as PetrolPrices, Mysupermarket Compare and Switcheroo.
Companies can also consider providing financial education programmes – these can either draw on in-house resource and expertise or via an external provider, targeting key moments in working lives for example, such as ahead of maternity leave, the purchase of a new home or preparing for retirement, to help employees make more informed choices.
Support in-work progression
Supporting in-work progression is key to helping employees maximise their earning potential. This can be via formal exams, learning and development programmes and measures to help boost confidence and ambition.
Embedding structured learning and development into the workplace is something that can be tailored to all budgets and there is plenty of free content via sites like YouTube or Business Balls or pay-as-you learn courses via Udemy. ‘Share and learn’, where one team member is tasked with creating a learning session for their colleagues can be powerful in developing subject knowledge.
Mentoring and work shadowing also take advantage of a company’s existing experience and help expose employees to different roles and opportunities.
The years ahead are looking set to be tough for businesses and employees alike but responsible employers can ensure they listen to their team’s concerns and consider the best way to help their people through more challenging times. While paying a living wage will always be key, looking at developing sustainable workplace solutions that help maximise employee financial resilience and wellbeing are both an attractor and an enabler and will help to underpin corporate stability in an uncertain economic climate.