Helping Employees with the cost of Living Crisis

With the cost of living crisis affecting everyone in the UK, many employers are trying to find ways of assisting their employees through these times and helping their money to go further. According to the latest figures from the Office for National Statistics, UK inflation increased to 9.1% in the year to May 2022 – its highest level since 1982. This surge continues to add pressure to already stretched household finances as the country grapples with the worst cost of living crisis in years.

A recent study from Barnett Waddingham suggests that 7% of employees with a workplace pension are planning on reducing their contributions to help them cope with the cost of living. This equates to 1.05 million people with almost one in five 18–24 year olds stating they plan to reduce their contributions, at a time when it’s vital to lay the foundations for a stable financial future.

Supporting employees

Although it is easy to suggest that employers should raise salaries to reflect the increasing inflation rates, many employers are not in a financial position to do so and offering higher pay alone does not solve all financial wellbeing worries. For example, Barclays are awarding 35,000 employees a pay rise from 1^st August. This won’t be possible for the majority of businesses, who are themselves feeling the squeeze.

Legally, there is no obligation on employers to raise employees’ salaries to reflect the increased cost of living. As long as employers are paying at least the minimum wage, what is agreed in an employee’s contract of employment is technically what an employer is obliged to stick to. In that sense, many employers will look at non-financial ways of helping staff.

Some employers have been able to offer benefits packages to employees to alleviate some of the strain, this includes:

• Employee rewards and “perks”, such as “cycle to work schemes, and gym memberships;
• Special discounts, such as retailer discounts;
• Medical or health insurance; and
• Budgets to cover expenses such as childcare and transport.

Although these benefits may cost the employer, to the employee, the benefit may be greater than being paid the costs as additional salary.

Some employers have opted to use a salary sacrifice scheme in order to cover additional costs. These schemes allow employees to pay for things through their company payroll to reduce the amount of tax paid and can help them to save money. It is very common for pension contributions to be paid this way, but can also be applied to insurance and other benefits such as company vehicles, and electric vehicles to help save money on fuel.

The use of external support systems is another option for employers to help their employees. Many workplaces offer an Employee Assistance Programme (EAP) to help employees deal with personal issues that may impact their work performance, health and well-being. An EAP offers employees a wide range of support in the forms of resources, counselling and legal support to help employees who may be struggling with their finances. On top of this, employers can also assist by signposting other support services such as MoneyHelper’s online budget planner, and Citizen’s Advice to advise on benefits or grants that may be available to their employees. There are also charities that can be signposted to employees to help with debt concerns such as StepChange and National Debtline.

The use of hybrid and homeworking arrangements can be beneficial to employees to help lessen their commuting fuel costs. If employers to decide to adopt this approach then it is important that an employee’s contract of employment is updated to reflect this and avoid disputes arising down the line. However, this arrangement may have an adverse affect going into the winter months with the cost of heating homes during the day becoming a concern for homeworking employees so employers need to be aware of this factor.

Employers are encouraged to consider options to help their employees through this cost of living crisis when reviewing their remunerations packages. They are also encouraged to reflect and assess the support in the workplace when employees are facing personal worries or stress such as those around finances and whether these support processes need to be addressed or implemented. These can have a detrimental effect on the wellbeing of employees which inevitably impacts productivity and the business as a whole. It is important to introduce appropriate measures to combat this.