Considering and deciding on the best way to support employees through the cost of living is one of the toughest challenges for business owners right now. You want to be fair to your team, but you also need to secure the long term finances of your business. So how do you go about supporting employees through the rising cost of living?
Abraham Maslow established the concept of a hierarchy of needs in his 1943 paper, titled “A Theory of Human Motivation.” The first two of these were physiological needs and safety needs. The first includes the basics for human survival such as food, drink, shelter and warmth. Once these are satisfied, then safety needs are next such as emotional and financial security.
If some of your team are struggling to meet these needs with their current salary or wages, then you may find that they are disengaged and that retention will become a problem.
You may also find that there are practical issues which can affect how they perform their work, such as not being able to meet the costs of childcare, or relying more heavily on the support of family and friends for unpaid child care.
If your business isn’t able to fund salary increases to help with the cost of living crisis, there are other impactful ways to help your employees through these tough times. While some come at a monetary cost, they won’t cause a rise in base salaries in a way that a pay increase would.
Provide staff benefits.
Offering simple benefits to your team won’t come at a huge cost to your business, but it can go a long way in relieving some of your employees’ financial stress and showing you care. Think staff lunches, travel vouchers, working at home allowance, tech purchase schemes and retailer discounts.
A little can go a long way here. For example, providing a railcard for employees won’t make much of a dent in your outgoings, but it will give your team a one-third discount on train tickets, helping with commuting expenses. This works best if your team infrequently travels to the office or to events, as a railcard won’t give a discount on season tickets used for more consistent commuting.
Think about what would be best for your specific situation here. While a railcard can be used to travel at any time of day, a minimum fare of £12 is payable during peak morning hours, so it may not benefit your employees. It’s also important to be aware some of these benefits can have tax consequences for both employers and employees.
Offer greater flexibility around working.
The pandemic saw major shifts in the way businesses operate. Zoom calls became the norm, and many of us benefited from working from home. Since then, a number of companies have gone back to office-based work for at least part of the week. If your business currently enjoys remote work for two days of the week, consider adopting a more flexible working style for your employees, increasing to three days from home and being more flexible with working times.
Reduced commuting and childcare costs are areas they’ll be able to save when remote. You could go one step further and propose set days for whole-team remote working, reducing the lighting costs of your office space and bringing down your overheads.
Improve your employees’ financial literacy.
A study conducted by WEALTH in April 2022 found that only 35% of UK adults keep a budget and know what they can afford to spend each month. Offering financial education programmes can make a huge difference in supporting employees through cost of living. Helping them learn how to budget, save money and manage debt. A key part of offering financial guidance in the workplace also involves removing the stigma around talking about money worries. When offering financial education, make sure it’s well-signposted and staff feel encouraged to access the support.
Clearly communicate the benefits you offer.
If your company already offers some benefits, how many of your staff are taking advantage of them? Are they aware of what they are and how to access them? Regardless of how fantastic the support is that you offer, it won’t be of any help unless it’s well-communicated to your team. If your business offers to buy unused holiday, has this been signposted?
The last time an employee read the company benefits might have been when signing their contract a few years ago, so take steps to ensure your team is well-versed in the support available to them.
Offer improved terms and conditions without paying more.
When was the last time you reviewed your employment terms and conditions? Perhaps you can make a change that doesn’t have a direct cash impact. For instance, can you increase holidays or reduce the working week?
This might help with retention if you can’t afford a direct increase to wages or salaries, but if your team is finding it difficult to pay for the basics from their current wages, it may not have much impact.
Offer financial relief that doesn’t cause a permanent increase in employee costs.
One-off “cost of living” payments for supporting employees. Financial support without causing your monthly outgoings to surge. You could also look at offering fixed-period support to employees. For instance, an increase in pay for 6 months with a review at the end. This avoids “baking-in” the increase. However, whilst this may help in the short term, you may find you need to increase wages and salaries permanently if you have fallen behind the market rate.
Prices are rising – and will continue on that trajectory. Even if the rate of inflation falls, this is the rate of increase that’s slowing, not prices decreasing. There will come a point where you need to take the plunge and increase wages and salaries. The crucial decision is when it happens; be aware of how staff retention could be affected. Be transparent with your team.
Honesty is everything. Explain the numbers, communicate that you want to increase their pay, and tell them why there are hurdles at the moment. Show your staff what you’re doing to support them in alternative ways. If everyone in your business understands that a pay increase is only possible with a combination of price increases and cost savings, it could boost productivity and encourage staff to take advantage of upselling opportunities.
If you don’t already have one, why not introduce a staff suggestion scheme? These can provide tax free cash incentives to your team, provided the limits provided in the legislation are not exceeded and the rules are met.
Get support for your business, so your business can support your team.
The current financial uncertainty can make running a business feel like everything’s out of your control. It doesn’t have to feel that way. We’re here to help you navigate the complexities and uncertainties as you support employees through cost of living. Fill in our form and we’ll look at how we can support you to feel firmly in control of your business.
