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

Nicola Ryan worries about rising inflation. Not just the impact of price increases on her personally, or her employer One and All, a manufacturer of school uniforms based in Stockport, in the North West of England. She worries about the impact on all of her co-workers trying to manage their household budgets. “We are in a real crisis,” explains Nicola, who is director of support for colleagues. “We know [staff are] really worried.” The summer months will be relatively easy compared to October, when the “pinch point will increase [energy] bills”.

One and All has raised wages by 4.5% for everyone except administrators – a rise that would seem generous in normal times, but is now below UK inflation, which hit 9% on last month and is expected to reach double digits in the fall. . But the company is doing its best to target aid toward those in lower-paying positions, including manufacturing and warehouse work.

It has increased the share of all staff profits, which is expected to be worth more than £2,000 per person this year, and has set up an emergency fund to help those in difficulty. “We were really honest and said it was due to the cost of living crisis,” says Ryan. “We are preparing for October.” This is in addition to existing interest-free crisis loans for unexpected bills such as boiler breakdown and free money management advice. One and All is accredited by the charity Living Wage Foundation (which sets its ‘true’ living wage at £9.90 an hour in the UK and £11.05 in London) and is also committed to adhere to “real life hours”, ensuring predictable shifts of at least 16 hours per week.

After two years of pandemic upheaval, employers in the UK – as in much of the developed world – are facing rising costs. Although average wages are rising rapidly, by historical standards, inflation is rising even faster. Government support of the type announced by UK 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, others feel both an ethical imperative and intense business pressure, amid labor shortages, to help low-income people. revenue.

“Organizations say they struggle to pay, but they feel morally obligated to help employees. They try to make sure their benefits package is the best it can be,” says Sheila Attwood, editor of research group XpertHR, which tracks pay settlements for UK employers.

During the pandemic, many companies have strengthened sick pay provisions or offered new benefits related to wellness and mental health. Now the focus is on food, childcare or transportation. In the UK, supermarkets Sainsbury’s and Iceland have increased staff discounts, while the Norfolk and Suffolk NHS Foundation Trust has set up a food bank for staff.

In the United States, some employers offer assistance with driving expenses, according to Becky Frankiewicz, president of ManpowerGroup North America, a multinational recruitment company. “Gasoline subsidies are a new incentive. Transport vouchers and [help with] carpooling for workers for less than $20/hour is quite widespread. »

In France, tax breaks are prompting employers to offer meal vouchers and holiday vouchers, and business group Medef has proposed that the tax companies pay to fund public transport be redirected to help car commuters to fill up. Take-up of the “Macron bonus”, a tax-free bonus that employers can offer to low-wage workers, has been low. Economy Minister Bruno Le Maire urged companies to do more.

Recent research from CEBR found that 10% of UK employees missed work days due to financial problems, while another fifth of workers were less productive because they spent working hours worrying about work. money – at a total annual cost to businesses of over £6 billion. However, employers are reluctant to take responsibility for day-to-day living costs, such as energy. “Most companies think this is best addressed through a fixed salary. It offers more security. Allocations are hard to stop,” says Alasdair Wood, senior director at consultancy Willis Towers Watson.

Bar chart of financial issues for employees experiencing presenteeism due to financial worries (%) showing that financial worries fuel presenteeism

Many employers are keeping a low profile on the issue, says Norman Pickavance, chief human resources officer and financial inclusion leader. “Tackling the problem means acknowledging the problem – which means they have to do something about it.” The most obvious solution is to raise salaries, he points out. “Everything else looks like window dressing.”

Yet the UK’s CIPD – representing HR professionals – says that even when employers can’t afford to raise salaries, they can still follow good practice to protect staff from poverty.

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

Greater flexibility around salaries can also help. Aviva, the insurer, is one of the companies that allows staff to resell unused annual leave. And Willis Towers Watson says employers in low-wage sectors are increasingly adopting tools like Wagestream, which provide instant access to earned wages. There are concerns about these apps, which incur transaction fees and could simply delay financial hardship. But employers in areas such as hospitality and care say they’re better than payday loans.

Other forms of flexibility matter too, with many white-collar workers now questioning the value of commuting. Tim Oldman, Managing Director of Leesman, a workplace research company, says: “We’ve had two years without travel expenses [on] our monthly salaries. All over the world, employees are thinking about the cost of travel. »

Some companies are now repositioning working from home as a cost of living rather than a matter of work-life balance. Neil Carberry, chief executive of the British Confederation of Recruitment and Employment, says: “Companies think very flexibly to respond to employee concerns. . . Hybrid work reduces travel costs and in this environment is more attractive. »

There’s also a new focus on compensation and career progression, says Duncan Brown, independent rewards management consultant. Many low-paying jobs offered “a fixed rate with no progression or career structure”, he says, but his children in their twenties now routinely asked in interviews when the salary would be reviewed.

Frankiewicz agrees: “The most exciting thing is that employers and employees are now realizing that blue collar workers expect and demand a career plan. Traditionally, this was a white-collar incentive.

Regardless of their longer-term outlook, some employees will struggle in the coming months. Some employers are offering targeted help: John Lewis, the employee-owned retailer, is doubling its financial aid fund, acknowledging that staff will find it “financially difficult”. Most, however, do not intervene directly: the buzz in HR departments around “financial wellness” usually results in offers of financial education and budgeting tools; nudges to save more in a pension; or perhaps referral to debt counselors if needed.

For workers whose problem is a lack of pay rather than the ability to manage their money, it can feel like a cynical distraction. But counselors say they help “normalize” conversations about money worries. “We encouraged employers to get people to talk more openly about money issues,” says Charles Cotton, senior adviser at CIPD.

“Companies should look at these things as a whole,” Wood says. “A financial wellness app alone won’t do you any good. But you can get a lot of help from some decent financial education, like tracking your expenses as part of the strategy.

Employers will need to pay greater attention to the personal circumstances of workers as the pressure on incomes worsens. “Companies learn as they go,” says Wood, noting that most senior executives don’t have the experience of leading companies through a period of high inflation. “The key element is uncertainty,” he says. “No one knows when this will end.”

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