Cost of living crisis: How employers are stepping in to help

Nicola Ryan is worried about rising inflation. Not just the impact of the price increases on her personally or on her employer, One and All, a school uniform manufacturer based in Stockport in north-west England. She is concerned about the impact on all of her colleagues trying to manage her household budget. “We are in a real crisis,” says Nicola, Head of Colleague Support. “We know [staff are] really worried.” The summer months will be relatively easy compared to October when the pinch point will rise [energy] Bills”.

One and All has increased wages for all but directors by 4.5 per cent – an increase that would seem generous in normal times but is now lagging behind UK inflation, which hit 9 per cent last month and is expected to hit double digits in the autumn . However, the company is doing its best to offer targeted help to those in lower-paying positions, including manufacturing and warehouse work.

It has increased profit-sharing for all employees, which is expected to be worth more than £2,000 per person this year, and set up an emergency fund to help those struggling. “We were really honest and said it was because of the cost of living crisis,” says Ryan. “We’re gearing up for October.” This is in addition to existing interest-free crisis loans for unexpected bills like a boiler breakdown and free financial management advice. One and All is accredited by the Living Wage Foundation charity (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 living hours“, which guarantees plannable shifts of at least 16 hours per week.

After two years of pandemic turmoil, employers in the UK – like much of the developed world – are grappling with rising costs. Although average wages are rising fast by historical standards, inflation is rising even faster. Government support, as announced by Britain’s Chancellor Rishi Sunak on Thursday, will help a lot, but it won’t close the gap for everyone, and many families will still feel the strain. And while some companies say they can’t afford to pay workers more, against a backdrop of labor shortages, others feel both an ethical imperative and strong commercial pressure to help low-income people.

“Organizations say they struggle with affordability, but they feel a moral obligation to help employees. They try to make their benefits package as good as possible,” says Sheila Attwood, editor-in-chief of research group XpertHR, which tracks payslips from UK employers.

During the pandemic, many companies have strengthened sick pay policies or offered new wellness and mental health benefits. Now the focus is shifting to nutrition, childcare or transportation. In the UK, supermarkets Sainsbury’s and Island have increased employee discounts, while the Norfolk and Suffolk NHS Foundation Trust has launched a food bank for employees.

According to Becky Frankiewicz, global chief commercial officer at ManpowerGroup North America, a multinational staffing firm, some employers in the US are offering commuting assistance. “Gasoline subsidies are a new incentive. transport vouchers etc [help with] Ride-sharing for workers under $20/hour is pretty common.”

In France, tax breaks give employers an incentive to offer meal and holiday vouchers, and the Medef group has suggested that levies that companies pay to fund public transport could be redirected to help commuters get fuel. Take-up of the Prime Macron, a tax-free bonus that employers can offer low-income earners, was low. Economics Minister Bruno Le Maire admonished company to do more.

Recent research by the CEBR found that 10 per cent of UK workers missed working days due to financial problems, while a further fifth of workers were less productive because they spent their working hours worrying about money – at a total annual cost to businesses of more than £ However, 6 billion employers shy away from taking on the costs of everyday life, such as energy. “Most companies find that the best way to solve this is with a fixed salary. It offers more security. Allowances are hard to stop,” said Alasdair Wood, senior director at consulting firm Willis Towers Watson.

Many employers remain silent on the issue, says Norman Pickavance, HR director and head of financial inclusion. “Tackling it means acknowledging the problem – which means they have to do something about it.” The most obvious solution is a pay rise, he points out. “Everything else looks like window dressing.”

Bar chart of employees who go to work but are distracted by financial issues (%) shows financial worries leading to lower productivity

But Britain’s CIPD – which represents HR professionals – says that even if employers can’t afford to raise wages, they can still use best practices to protect workers from poverty.

One is to ensure that the lowest paid workers are paid a fair wage. In the UK, the number of accredited living wage employers has nearly doubled since the pandemic began. This year, under pressure from activist investors, Sainsbury’s began paying real living expenses to its direct employees, as other supermarkets have done, although it is not officially accredited.

Greater flexibility in wages can also help. Aviva, the insurer, is among the companies allowing employees to sell back unused annual leave. And Willis Towers Watson says employers with frontline shift workers are increasingly adopting tools like Wagestream, which offer instant access to earned pay. There are concerns about such apps that could incur transaction fees and simply delay financial troubles. However, employers in fields like hospitality and care say they are better than payday loans.

Other forms of flexibility count, too, with many employees now questioning the value of commuting. Tim Oldman, managing director of Leesman, a workplace research firm, says: “We had two years with no travel expenses [on] our monthly salaries. All over the world, employees are thinking about the cost of commuting.”

Some companies are now repositioning home working as a cost of living rather than a work-life balance issue. Neil Carberry, Chief Executive of the UK’s Recruitment & Employment Confederation, says: “Companies are very flexible in how they think about responding to the concerns of their employees. . . Hybrid working reduces commuting costs and is more attractive in this environment.”

There’s also a new focus on pay and career progression, says Duncan Brown, an independent rewards management consultant. Many low-wage jobs offered “a fixed salary with no progression or career structure,” he says, but his 20-year-old children would now naturally ask when they interviewed when the pay would be reviewed.

Frankiewicz agrees, “The most exciting thing is that employers and employees are now realizing that workers expect and demand a career plan.” Traditionally, this has been an incentive for employees.

Regardless of their longer-term prospects, some employees will struggle over the next few months. Some employers are offering targeted help: John Lewis, the employee-owned retailer, is doubling its financial aid fund and admits employees will find it “financially difficult”. However, most don’t directly intervene: The excitement in HR departments about “financial well-being” generally leads to offerings of financial literacy and budgeting tools; nudge to save more in a pension; or maybe pointers to debt counselors where needed.

For workers whose problem is a lack of pay rather than the ability to manage money, this can seem like a cynical distraction. But advisers say they are helping “normalize” talks about money worries. “We have encouraged employers to get people to be more open about money issues,” says Charles Cotton, a senior adviser at the CIPD.

“Companies should think about these things collectively,” says Wood. “A financial wellness app alone is useless. But you can get a lot of help from a decent financial education, like tracking your expenses as part of strategy.”

Employers need to pay more attention to workers’ personal circumstances as the wage squeeze worsens. “Companies learn over time,” says Wood, noting that most executives are not experienced in guiding companies through periods of high inflation. “The most important thing is the uncertainty,” he says. “No one knows when this will end.”

The article has been amended to say that employers with frontline shift workers are using tools like Wagestream, rather than employers in low-wage sectors as originally stated.

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