The cost of living crisis: How employers can step in to help

Nicola Ryan worries about rising inflation. It wasn’t just the price hike that affected her or her employer, One and All, a school uniform manufacturer in Stockport, north-west England. She worries that this will affect all colleagues trying to manage the family budget. “We’re in a real crisis,” said Nicola, director of peer support. “we know [staff are] Really worried. “Summer months are relatively easy compared to October, when “the key points will go up” [energy] bill”.

One and All has raised wages for all but directors by 4.5% – which looks generous in normal times but is now below UK inflation, which hit 9% last month, Double digits are expected in the fall. But the company is doing its best to help those low-wage jobs, including manufacturing and warehouse jobs.

It has increased all staff’s share of profits, expected to be worth more than £2,000 each this year, and has created an emergency fund to help those in distress. “We were really honest and said it was due to the cost of living crisis,” Ryan said. “We’re gearing up for October.” That’s on top of existing interest-free crisis loans for unexpected bills like boiler failure and free financial management advice. One and All is recognised by the charitable Living Wage Foundation (which sets its “real” living wage at £9.90 an hour in the UK and £11.05 in London) and is also committed to “real life time”, guaranteeing a predictable shift of at least 16 hours per week.

Employers in the UK – like most developed countries – are grappling with rising costs after two years of pandemic upheaval. While average wages are rising rapidly, inflation is rising faster by historical standards. The kind of government support announced by Chancellor Rishi Sunak on Thursday will go a long way, but it won’t fill the void for everyone and many households will still feel the pressure. While some companies say they can’t afford to pay more workers, others believe they feel both a moral imperative and a huge commercial pressure to help low-income earners amid a labor shortage.

“Organizations say they struggle with affordability, but they feel an ethical obligation to help their employees. They are trying to make the best out of their benefits package,” said Sheila Attwood, executive editor of research group XpertHR, which tracks the UK Payroll settlement for employers.

During the pandemic, many companies have enhanced sick pay arrangements or offered new health and mental health-related benefits. The focus is now shifting to food, childcare or transportation. In the UK, supermarkets Sainsbury’s and Iceland have boosted staff discounts, while Norfolk and Suffolk NHS Foundation Trusts have set up staff food banks.

In the U.S., some employers are offering help with driving costs, said Becky Frankiewicz, president of multinational human resources firm ManpowerGroup North America. “Gasoline subsidy is a new incentive. Transport vouchers and [help with] Ridesharing for workers under $20 an hour is fairly common. “

In France, tax breaks incentivize employers to provide lunch and holiday vouchers, and business group Medef has proposed that taxes paid by companies to fund public transport could be repurposed to help car commuters refuel. The use of “prime Macron”, a tax-free bonus that employers can offer low-wage workers, has been low.Economy Minister Bruno Le Maire exhort Businesses do more.

Recent CEBR research has found that 10% of UK workers are absent due to financial concerns, and another fifth is less productive due to worrying about money during working hours – a total cost to business of more than £6bn a year. However, employers are wary of taking responsibility for everyday costs such as energy. “Most companies think it’s best solved with a fixed salary. It provides more security. The perks are hard to stop,” said Alasdair Wood, senior director at consultancy Willis Towers Watson.

Financial concerns related issues bar graph (%) for employees with attendance due to financial worries showing that financial worries drive attendance

Human resources director and financial inclusion leader Norman Pickavance said many employers remained tight-lipped on the issue. “Fixing it means acknowledging the problem — which means they have to do something about it.” The most obvious solution, he noted, was a pay rise. “Everything else looks like a facade.”

However, the UK’s CIPD, which represents HR professionals, said that even if employers were unable to raise wages, they could still follow good practices to protect employees from poverty.

One is to ensure that the lowest paid employees receive a fair wage. In the UK, the number of accredited living wage employers has almost doubled since the start of the pandemic. Under pressure from activist investors, Sainsbury’s started paying its direct employees a living wage this year, as did other supermarkets, although it was not officially recognised.

Greater flexibility in wages would also help. Insurance company Aviva is one of the companies that allows employees to return unused annual leave. Willis Towers Watson said employers in low-wage industries were increasingly adopting tools such as Wagestream, which provided instant access to wages.Have worry Around such applications – these come with transaction fees and may simply delay financial hardship. But employers in fields like hospitality and care say they are better than payday loans.

Other forms of flexibility are also important, and many white-collar workers are now questioning the value of commuting. Tim Oldman, chief executive of workplace research firm Leesman, said: “We’ve had no commute costs for two years. [on] our monthly salary. Employees around the world are considering the cost of commuting. ”

Some companies are now repositioning working from home as a cost of living rather than a work-life balance issue. Neil Carberry, chief executive of the British Recruitment and Employment Federation, said: “Companies are very flexible in their thinking about addressing staff issues. . . Hybrid work reduces commuting costs and is more attractive in this environment force.”

Compensation and career development have also become a new focus, according to Duncan Brown, an independent consultant on compensation management. Many low-paying jobs offer “fixed wages with no progression or career structure,” he said, but his 20-somethings now rightly ask at interviews when pay will be reviewed.

Frankiewicz agrees: “The most exciting thing is that employers and employees are now realizing that blue-collar workers are expecting and demanding career planning.” This has traditionally been an incentive for white-collar workers.

Regardless of their long-term prospects, some employees will struggle for the next few months. Some employers are offering targeted help: Employee-owned retailer John Lewis is doubling its financial aid fund, acknowledging that employees will find it “financially tough”. Most, however, are not directly involved: the HR buzz around “financial wellbeing” often translates into providing financial education and budgeting tools; a push to save more in pensions; or a roadmap to debt counselors when needed .

It may seem like a cynical distraction for workers whose problem is a lack of wages rather than the ability to manage money. But advisers say they have helped “normalize” the conversation about money concerns. “We’ve been encouraging employers to get people to talk about money more openly,” said CIPD senior adviser Charles Cotton.

“Companies should look at these things holistically,” Wood said. “Financial health apps won’t do any good by themselves. But you can get a lot of help from a decent financial education, like tracking your expenses as part of your strategy.”

As the income crunch intensifies, employers will have to pay more attention to workers’ personal circumstances. “Companies learn as they grow,” Wood said, observing that most senior executives have no experience leading companies in times of high inflation. “The key is uncertainty,” he said. “No one knows when this will end.”