High inflation rates, in particular substantial increases in energy, food and housing costs, are creating critical challenges for households across the UK, with the effect of eroding rises in nominal earnings. The OBR report in November projected that real household disposable income will fall by 7% by 2024. According to a survey by the CIPD in April 2022, one in four employees say that money worries affect their ability to do their job.
In this context there is a strong business case, alongside moral arguments, in favour of employers showing their commitment and making concerted efforts towards supporting the financial wellbeing of their workforce. Given that many employers are facing similar financial challenges themselves, what steps can you take as an employer to tackle in-work poverty and to support your staff through the costs of living crisis?
Targeted pay rises
You should consider targeting pay rises towards lower-paid staff. In some cases, these rises will be determined by increases to the National Living Wage and National Minimum Wage which will soon come into effect. The National Living Wage is increasing by 9.7% to £10.42 per hour from 1st April, with similar rates of increase to the various National Minimum Wage rates.
One-off bonus payments
Some employers are offering one-off cost of living support payments to their staff, which can support staff morale as well as giving some immediate financial assistance.
Free/subsidised meals and snacks
You could look at providing support with for example breakfast clubs or providing fresh fruit in the workplace. It is also worth looking into potential tax efficiencies; for example, working lunches can be tax-free and also tax-deductible for the employer, so long as the business purpose outweighs the social aspect.
Discounts with local businesses
You should look at developing arrangements for staff discounts with local shops and businesses, and making sure that your employees make the most of these.
Encourage use of benefits schemes
Similarly you should promote the take-up of your existing benefits schemes. For example you may have a health plan scheme which allows staff to reclaim health expenses such as dental check-ups and eye-tests. Salary sacrifice schemes such as the Cycle to Work scheme or schemes for buying laptop computers can also deliver significant costs savings.
Greater flexibility in relation to hybrid working
For many employees, there is a fine balance between the costs of travelling to work and the extra cost of energy bills if working from home. You should appreciate these factors in the context of requests to change working patterns.
Allowing secondary employment
Many employees have already taken on a second job to support their family finances, or are considering doing so. So long as the secondary employment does not conflict with the employer’s interests or detrimentally impact the employee’s performance, employers should view sympathetically requests to take up other work outside an employee’s normal working hours. There are also now legal restrictions on employers using exclusivity clauses in contracts for low-income workers (those earning less than £123 per week) as well as in zero hours contracts.
Buying and selling annual leave
Some employers operate schemes which allow staff to buy or sell holiday entitlement, outside the statutory leave entitlement of 5.6 weeks / 28 days.
Income streaming and other payroll assistance
Income streaming is a relatively new concept. This system allows employees to draw down some of their earned wages before payday, helping them to avoid reliance on payday loans. Other assistance could include offering loan consolidation via payroll, or the availability of hardship funds.
Advice on debt management
You should be able to signpost your employees towards free sources of money and debt advice, such as the Government’s Money Helper & Pensions Service websites, Citizens’ Advice or local debt charities. Debt management advice may be available as part of an Employee Assistance Programme (EAP), or you could offer financial education programmes in the workplace to assist with budgeting and money-saving tips.
Taking away the stigma around money worries
Perhaps the most important step for employers is to work towards removing the stigma surrounding debt and money worries, in much the same way as other stigmas and taboos, such as around mental health and dependencies, are gradually being challenged. You can start to normalise conversations about financial worries, and expressing concern and empathy can help to remove any stigma and to avoid your employees suffering in silence and in isolation.
For further information contact Senior Associate, Patrick Glencross, on 01227 763939.
