While news of interest rates rising to 4.25% may curtail soaring prices, it could also mean that people struggle more to afford to everyday financial products. And the fact is, the cost-of-living crisis – which has seen people’s real disposable income dramatically fall due to rising fuel and energy costs – isn’t likely to go away anytime soon.
Research carried out by chartered insurance broker Partners& found that nearly all (97%) employers are expecting the number of employees facing financial difficulties to rise during 2023. The survey also showed that around two-thirds (67%) of organisations were aware of staff already struggling to manage their personal finances.
Steve Herbert, wellbeing and benefits director at Partners&, says: “The reality is there are millions of working people who are genuinely struggling in a way that we have not seen since the second world war. The big question is whether employers know that.
“Employees who are significantly financially stressed are likely to be distracted, less engaged and less productive. Employers need to help these people, and they can do so in overt or covert ways.”
But how can companies help their workforces at a time when they too may be struggling with their overheads?
Firstly, it’s important to remember that helping employees through the crisis doesn’t have to be at great financial expense to the employer. There are many low-cost, and even free, benefits that organisations can offer.
Herbert says that while employers could offer higher salaries or one-off payments to help, that may not be a long-term solution. He highlights some ‘easy wins’, such as employee assistance programmes, which all offer free debt counselling support as standard, so all employers have to do is make sure their workforce is made aware of the service.
Herbert adds: “Employers could also be flexible as to whether or not employees work from home or in the office. Some may want to work from the office to save on their household energy bills, while others may wish to work from home to save on commuting costs. If they chose to work from the office, employers with on-site parking could consider offering free parking or negotiate a deal with a provider to lower the cost of parking.”
To help make cash flow easier, he suggests that organisations should consider reimbursing expenses weekly if they do so monthly – especially since it doesn’t cost them a penny.
Samantha O’Sullivan, policy lead for the Chartered Institute of Payroll Professionals (CIPP), says: “The cost-of-living crisis is impacting everyone in the UK including employers, who are typically missed out when considering who is suffering in the current climate.
“Employers may not be able to increase base-line salaries in line with inflation, but they could explore improving the overall remuneration package for employees.”
She agrees that an employee assistance programme could support employees with stress, debt problems and welfare counselling, and also suggests they think about introducing paid for meals at work, as well as access to and providing the use of employee discount schemes.
O’Sullivan adds: “Offering salary sacrifice as an option for cycle to work, pensions and childcare voucher schemes, ensuring national minimum wage compliance is met, is also something businesses should be considering.
“Although it is not a legal requirement for employers to do this, there will be a much greater emphasis on them to be proactive and support staff through these difficult financial times.”
Gautam Sahgal, CEO at global rewards and benefits provider Perkbox, also thinks that while an increase in salary is an obvious solution to help support the workforce through a particularly challenging economic environment, it may not always possible.
He says: “An additional avenue for businesses to offer more specialised and individualised support is through reviewing their wider reward and benefits offering to see where improvements can be made.
“By recognising and rewarding great achievements, behaviour, values and milestones, employees can feel valued and empowered and still enjoy the moments that matter to them – whether that’s a food delivery from their favourite restaurant, or a family day out. Ultimately, this allows businesses to support teams’ financial, physical, and mental wellbeing, while keeping them engaged and happy at work.”
A line in the sand
Don’t ask, draw a line in the sand and just assume employees earning less than £30,000 a year will be struggling, advises Herbert.
He says: “This is likely to move up over time, with increasing levels of poverty among those with incomes above £30k as well.
However, Ian Hodson, head of reward and deputy director of HR at University of Lincoln, believes support is now needed for middle-earners too. He thinks employers shouldn’t assume it is just the low-paid that need help because those who earn more may also have financial worries, such as higher mortgage payments and energy bill that they are struggling with.
“Any support should be underpinned by better financial education,” Hodson says. “Employers should implement a realistic support programme. They need to remember that they are helping people through the crisis, but they are not fixing a problem.”
University of Lincoln currently offers both staff and students a pre-paid debit card that can be used to help manage their spending. They can also earn cashback when they use it at specific retail outlets.
He says: “Nowadays, what employees value from employment doesn’t come with a big price tag attached. Staff are more interested in the employee experience. They want to know their employer cares, and that there’s a sense of community.”
While employers have an important role to play in supporting people through these difficult times, the government does too. Employers can’t do anything about accommodation and rent prices going up, or energy prices, for example.
Charles Cotton, senior adviser for performance and reward at CIPD, believes it’s important to remember organisations can’t do it all and everybody has a role to play – employers, the government, benefits providers, unions, and of course individuals themselves.
He says: “Organisations are facing their own cost rises in terms of fuel and labour costs, not to mention having to prepare for the prospect of a recession.
“There are, however, three key ways that employers can help staff. Firstly, by helping them stretch the value of their pay packets, for example, by offering discounts. Secondly, by stopping them falling into financial difficulty through offering financial education. Thirdly, by offering services such as debt counselling and workplace loans to those who are already in financial difficulty.”
Ami Harrison, account director, AdviserPlus, warns that whatever they do, businesses should make their workforces aware of what’s on offer.
She explains: “Recruiting and retaining talent is very tough, and there are plenty of opportunities for employees elsewhere, so if companies are not prepared to have conversations with their people, they risk losing them.
“If organisations can’t offer pay rises or one-off bonuses, they need to review the current tools they have and identify other benefits they can provide that are perhaps not publicised well enough.”
Herbert adds: “Fundamentally the basics of finance are the same regardless of age. People need to assess where they are, put together a budget planner and consider ways to get out of debt if they need to.”
He recommends that employers ensure they have a good pensions scheme, workplace savings scheme, ISA or LISA or have a Christmas savings club to help people better manage their money. However, they should recognise that the financial crisis is likely to be ongoing.
“Employers need to accept that this is not a short-term problem. It isn’t going to go away any they need to support their workers. Do what you can and accept that you can’t help everyone,” Herbert concludes.