Debt Awareness Week 2023 – How to support your employees during the cost-of-living crisis
This week charitable organisation StepChange have hosted their Debt Awareness Week, an annual campaign to promote their free and impartial debt advice. Coinciding this week with the recent news of February’s unexpected 10.4% rise in inflation in the UK, primarily driven by food prices, it’s unsurprising that StepChange are finding many people who are coming to them are experiencing financial difficulties for the first time.
During financially unsettling times, mental health is often impacted. According to a study conducted by the Chartered Institute of Personnel and Development (CIPD), more than a quarter of employees experience job performance issues as a result of financial concerns, while nearly a third report that the current cost-of-living crisis has had a detrimental effect on their productivity. As an employer, and in most cases, the main source of income to your employees, you have a duty of care to recognise the impact the current crisis may be having on your employees’ wellbeing and ensure you’re offering appropriate support.
Mental wellbeing is not the only impact that employers need to consider. The current job market is complicated, with last year’s “Great Resignation” creating a more competitive job market and increased negotiating power for employees. Additionally, the UK narrowly avoided a recession but still faces a labour shortage. Yet it seems more and more businesses are making cuts to their workforce, as peoples spending decreases and the cost of things rises. Businesses are facing recruitment and retention challenges for a wide variety of reasons, and these have an impact on pay and reward decisions.
According to a survey by the CIPD, it is expected that the private sector will see pay increases, but many organisations won’t be in a position to offer company-wide pay rises in line with inflation, so will need to consider other ways in which they can ensure employees feel valued and supported in these increasingly difficult times.
A one-time ‘cost of living’ bonus
Last year we saw a flurry of companies, including Barratt, Taylor Wimpey, Lloyds and Rolls-Royce, offer one-off cost-of-living payments to their workforce. It’s a less costly alternative to committing to pay increases as it’s a one-time bonus to help curb the impact of the cost of living rises. Unlike ‘regular’ bonuses that are usually tied to performance or on a yearly pay schedule, these bonuses are designed to give employees a much-needed cash injection to support with the rising costs.
If this is something you can afford to do, make sure you’re clear, in writing, why the bonus is being paid, what period it covers and that it is a discretionary one-off payment, or you could give the impression that this is a contractual entitlement and set expectations for it to happen every year.
Another thing to consider, if making a one-off cost-of-living payment is whether this gesture inadvertently causes more financial hardship for any low-wage or part-time employees who may be in receipt of Universal Credit or Tax Credits, as this one-time cash injection could interfere with their benefit payments. As an employer you may not know this information about your workforce, so you could give the option of spreading the payment out over several months.
Given that the cost-of-living crisis is predicted to last at least well into next year, offering a one-off payment may not be sufficient and may have to become a more regular occurrence. However, this would not be sustainable for many businesses, making it necessary to explore alternative ways of supporting employees in coping with these challenging circumstances.
Continue being flexible
You may consider continuing with the flexibility that was afforded to employees during the pandemic – whether it’s allowing employees to work from home to reduce travel costs or coming into the office to save on utilities. Being flexible in your approach and recognising everyone’s situation is unique is alternative way to support your workforce. If you are considering implementing a hybrid work policy, we can help you with our HR Policy and document services.
As the old proverb goes, “teach a man to fish….” And that is what some organisations are trying to do, by investing in financial education for their employees to help them manage their finances better.
There are varying degrees of support that a company can offer, from directing your employees to support tools, like budget planners, calculators to help with financial decisions, helplines and charities such as StepChange or, putting on financial wellbeing workshops like holding a group session with a financial adviser.
Alternatively, offering funding for courses as an employee benefit in areas such as budgeting or debt management could be really helpful to some of your employees.
Amplify your existing benefits
If you already have an established benefit platform in your organisation, you may want to send out a reminder to your employees regarding some of the discounts they can receive. Benefit platforms frequently offer vouchers, discounts or cash back opportunities for high street and supermarket purchases, which can help take the pressure off the cost of the weekly food shop. There are also government programmes like the “Cycle to Work” scheme, which may appeal to people paying increased costs for fuel, and the tax-free childcare, where the government contributes 20% of childcare costs up to a maximum of £2000 per year.
Talking about money can be challenging and financial concerns are often seen as a taboo subject. However, having an open-door policy where employees feel comfortable discussing any financial difficulties they may be experiencing can help direct them towards the necessary assistance and support, whether its financial aid or mental health support.
Our suite of solutions enables line managers to tackle sensitive topics like financial difficulties, debt, or other traditionally taboo subjects with their employees. This empowers them to effectively manage employee relationships in a fair and consistent manner. We achieve this by leveraging technology to provide interactive and intuitive guidance, offering access to ER experts who coach managers to make informed decisions, and delivering specialised training to develop leadership skills, including managing mental health issues with confidence. Contact us to learn more about how we can help your managers build closer and more personal relationships with their direct reports by providing them with the right support and resources.