Maybe it’s the rise in national insurance (NI) contributions. Or, it might be the rocketing energy prices. Perhaps it’s the fact that pay settlements are failing to keep up with inflation. Whatever it is, we’ve all felt the pinch of the cost of living crisis. What’s worse, it doesn’t seem to be going away any time soon.
Of course, the crisis affects businesses too. So, while many employers want to help their workforce, it can be difficult when money is already tight.
In this article we take a look at the full scope of the UK cost of living crisis on businesses and how you can support employees through it.
How bad is it?
It’s not good. There is record use of food banks, inflation is at a 40 year high, and real wages are plunging. Next month will see the first cost-of-living payment to millions of UK homes on benefits.
In terms of wages, the National Living Wage is set to hit £10.50 in 2024. However, recent research has suggested that, to truly combat the rising cost of living, the minimum wage should be £15 an hour.
For many employers, that figure probably sets off alarm bells. You aren’t obligated to increase your pay rates beyond the national minimum wage. However, what this should do is highlight the scope of the problem the UK is facing.
Some companies have already taken action to face this challenge.
Lidl, for example, announced it would be spending £18 million to boost the wages of 21,000 staff. This includes paying £12.25 per hour for those who work in London. Green & Fortune have also stepped up. They announced that from December 2021, they would pay their staff more than the London living wage. Other companies, such as M&S, have introduced different kinds of support (more on that later).
Businesses are also struggling. Many employers are calling for further support from the government following a difficult few years during the pandemic. With organisations still struggling, what solutions are available to employers other than raising salaries?
How can employers help with the cost of living?
Offering a pay rise
If you can afford it, a cost of living pay rise is the best support you can give. While some businesses have done this, many haven’t. For a lot of employees, the price hikes in bills and essentials aren’t being matched by proportionate salary rises.
Pay rates differ depending on a number of factors, including industry and location. Some have felt the crunch more than others. Surprisingly, some low-paying sectors, such as hospitality, have seen a real pay rise. Meanwhile, those businesses that currently have inflation-proof pay growth might soon see their pay gains eroded.
In short, don’t take your pay rates for granted. If you want to check yours in line with pay data from your industry, our Reward team can get you the latest figures.
If you want to offer a cost of living pay rise to your lowest paid staff, you should do it in line with the national living wage. Not only that, keep a close eye on pay rates for your sector and the latest in the cost of living crisis. This is the only way to ensure your workforce receive the financial support they need to pay their bills
If you’re unsure where to start, you can receive pay & reward insights from our team of experts by calling 01455 858 132.
Ways to help that aren’t a cost of living pay rise
Information and communication
Employer support with the cost of living is crucial to staff productivity and wellbeing. If nothing else, maintaining communication with your employees and keeping them informed will help massively.
It sounds simple, but many individuals won’t know where to go for financial advice. Pointing them to resources such as the Money Advice Service will be useful. You can go further and provide seminars on money management or provide benefits that’ll allow them to stretch their salary.
Offer employees access to impartial guidance that’ll allow them to “sense-check” their workplace pension scheme. It might be tempting to reduce contributions to your pension to reduce outgoings. While this is an option, employees should consider the impact this will have on their long-term financial security.
The more in control your employees feel over their finances, the more secure they will be. Danielle Haig, Director at DH Consulting states:
“Psychological, emotional, and behavioural control over our finances is incredibly empowering and can make huge differences and improvements to all domains of our lives as well as our mental and physical health.”
Salary Sacrifice schemes
Salary sacrifice schemes are an excellent way to help employees by providing vital benefits and financial support. The main advantage of these schemes? They won’t have to worry about how they will pay for it.
A salary sacrifice scheme allows an employee to exchange part of their salary for extra benefits, usually non-cash benefits from the employer. These can include childcare vouchers, a company car, purchasing a bicycle through a cycle to work scheme, and additional pension contributions.
If you have an Employee Assistance Programme (EAP) in place, an employer could refer the employee to this. An EAP can include mortgage advice, financial planning and debt management as well as other non-financial issues. An employer may wish to consider offering counselling to help manage the emotional challenges that often accompany financial difficulty.
Mental health and money go hand in hand. It’s quite easy for a person to develop financial anxiety when they are struggling to pay bills. An EAP can help with the psychological side of this issue whilst also directing the individual to financial support schemes.
When a worker is struggling to pay the bills, they’ll be forced to make difficult decisions regarding where their money goes. In order to pay for the essentials, they may have to sacrifice something that is good for their health.
M&S picked up on this issue, and moved to address it. They introduced:
- Free health checks for its employees
- New benefits such as online GP service
- Financial management advice and
- Health check screening
Schemes such as gym memberships and discount codes can encourage employees to maintain a healthy lifestyle. Non-cash benefits such as a company car, childcare vouchers or a cycle to work scheme are also useful. It’ll help them pay for services they’d otherwise cut. health cash plans, like to one introduced by M&S can cover or pay money towards the cost of everyday healthcare too.
Not all companies will have the resources to introduce these types of benefit. But, if you can help a little, it’ll help your employees a lot.
Further support options
The cost of living crisis in the UK has caused headaches for employers and employees alike. With staff struggling to pay bills and facing difficult decisions, it’s important you do all you can to support them.
However, keeping your own business profitable during this is tough.
Luckily, Croner are here to support you with a range of solutions and 24/7 advice. Find the perfect balance in your business to maintain staff and stay successful by calling 01455 858 132,/a>.
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