What employers can do to help employees with the ongoing cost-of-living crisis as inflation and interest rates remain high.
In the second half of 2023, many employees will experience a greater squeeze on household finances than they have endured over the last 18 months. Mortgage rates have risen to 6%. A figure last seen during the 2008 financial crisis. And food and energy prices remain the highest among G7 economies. Most employees will not see an improvement in their financial situation until 2025 and coping with higher costs will leave the average household less financially resilient.
This has two major implications for employers. Employee financial wellbeing will remain a top priority for at least the next couple of years and employers will have to find ways to support their employees that are both meaningful and sustainable.
In our experience this means employers need to focus their cost-of-living support on four areas.
1. Ensure cost-of-living support covers all workplace demographics
Financial distress impacts all levels of the workforce. While lower paid workers have the highest levels of financial worries, top earners also score high. Added to which a host of variables - age, stage of life and existing financial commitment influence how an individual is impacted by the cost-of-living crisis.
The financial wellbeing programme will need to focus on three areas to cover all situations.
Build financial resilience – CIPD research shows the most effective financial education programmes focus on soft skills – the attitudes, knowledge and behaviour that help people to feel in control of their finances. It also shows that sustained support for building financial resilience is better than a one-off intervention. A programme of financial education helps staff to feel in control of their finances and avoid financial distress.
The most important focus is to ensure that employees have the resources to help themselves.
Recover from financial distress – 51% of UK workers, double last year’s number, say money worries are damaging their mental health. Clearing debt and coping with the emotional strain often requires help from a range of experts including debt management and counsellors. An Employee Assistance Programme (EAP) is a cost-effective way to signpost staff to a range of confidential advice and support services that most organisations simply don’t have the resource to provide in-house.
Increase employee’s overall financial position
Employers can use new employee benefits to improve employee finances. There is a lot of innovation in this space which can provide flexibility and targeted support for employees. So, it is for the employer to keep on top of this and promote what they have and for the employee to make it their business to find out what is on offer.
Coping with rising food and energy costs is the number one priority for many employees, so it makes sense to focus your first tranche of support here.
Then identify other quick wins to help reduce costs for employees. Look at what you can do to support the cost of work including travel, lunch and for home workers, heating. Help with the cost of living - the everyday costs of shopping, and life in general. An employee discount scheme properly understood and used can save employees a lot of money over the course of a year.
Include a focus on wellbeing to help with the mental and financial impact of the crisis. Actively market the support on offer, through multiple channels and make it a talking point for managers to acknowledge impact on staff. Lots of employers have created a cost-of-living hub to bring support together in one place. You don’t have to create this content yourself. Link out to credible third parties that offer advice and financial management tools. Consider an EAP to assist employees experiencing financial or mental distress.
Ticket Restaurant
Edenred’s pre-paid card, Ticket Restaurant, enables employers to electronically transfer money securely to employees, redeemable at all major supermarkets and food outlets. Unlike additional payments to salary, this method ringfences the money for the intended purpose.
Employee Savings
Edenred’s digital platform is a low-cost option for employers to give employees access to discounts across thousands of big brands, UK retailers, including all major supermarkets.
2. Normalise talking about financial health
Of the 20% of UK adults classified as living in poverty, 68% work. In-work poverty is at its highest level since records began in 1996 when this figure was below 50%.
Charlotte Hill, CEO of Edenred’s UK charity partner, The Felix Project, says it is critical for employers to destigmatise talking openly about financial distress at work. To make that happen, most organisations will need to create a financial wellbeing policy. A policy signals to employees that their employer takes their financial wellbeing seriously, outlines available support. It helps employees feel more comfortable asking for help and to manage expectations around what an employer can offer.
Work with leaders and managers to have regular conversations with their teams to normalise talking about financial health and destigmatise financial distress
3. Offer non-traditional benefits
Employees that work from home, compressed hours or flexibly report better wellbeing and engagement as well saving money on the commute. Similarly, giving staff permission to deal with personal financial matters during the working day supports, helps catch problems early before they escalate and impact mental health.
Despite their prevalence, many organisations aren’t making the most of salary sacrifice. This helps employees make savings on some of their biggest costs and saves the employer National Insurance contributions.
4. Drive return on investment
In a recent CIPD survey only 26% of staff earning less than £20,000 said benefits were quick and easy to get hold of compared with 65% earning more than £60,000. Offering employee benefits that meet employee needs, are inclusive and accessible is one of the best ways to increase your people’s spending power. This is especially true for lower paid workers. Employers need to work harder to help lower paid workers understand how particular benefits would support them and make them easier to access.
In the same study, only 42% of lower earners said their employer communicates which benefits are on offer compared with 74% of high earners. Communication is key to effectiveness and impact therefore this demands a sustained plan with special consideration give to reaching lower earners.
Invest time training managers to help them talk sensitively about financial health to staff, spot early warning signs of financial distress and signpost staff to appropriate support.
Keep checking with staff whether support is relevant. Ditch anything that doesn’t meet their needs and add new solutions to fill any gaps. There is plenty of innovation in this space so it pays to keep an eye on what other employers are doing so you can incorporate the best parts.
Employees continue to feel the mental and physical pressure of financial stress. By providing effective support employers can make a difference and reinforce a positive employee experience. For more ideas on how HR leaders can continue to support employees through the cost-of-living crisis download our report
