5 challenges HR faces to support employees through the cost of living crisis and how to solve them

uploaded on 16 February 2023

Thank you to all HR, Employee Reward and Benefits colleagues that completed our 2022 People Barometer survey at the end of last year. Your insight helped us shape a clearer picture of how the cost-of-living crisis is evolving, the impact on businesses and employees, and how HR will need to adapt the organisation’s response.


1) Managing the tension between expectation and action
Almost one in six employers say cost-of-living crisis poses the biggest threat to organisational performance in 2023


Although inflation has started to fall, the Bank of England predicts businesses and employers will continue to feel the pinch until well into 2024.  Supporting employees will continue to be a top business priority with one in six employers saying the cost-of-living crisis poses the biggest threat to performance in 2023.

Employers are keen to continue supporting their people but concerned that however much they do it will not be sufficient to meet employee expectations. Specifically, employers are concerned about mismatched expectations around salary (75%), the level of ongoing support the business has resource or budget to provide (50%), and how to communicate any misalignment to effectively manage expectations (30%). 

Action: ensure pay and support is fair and transparent

We know that fairness and transparency are critical to effective communication on pay and reward and that principle extends to explaining the cost-of-living support you offer and any limitations.

If you haven’t done so already, conduct a pay review to ensure pay is fair at every level of the organisation, especially lower grades. Similarly, review your employee benefits offer to include a range of price points across essential categories such as medical, dental, car leasing that take up a significant chunk of salary and may not be accessible to lower pay grades.

Look for other low and no-cost ways to support employees without denting the budget.  Ask employees what they would value.  Last year, popular options included time off to attend to personal issues during the working day, discount schemes and pre-paid cards to help employees save on everyday expenses and the opportunity to work flexibly to help employees save on commute and childcare costs.  Critically, remind employees of the full range of support on offer on a regular basis.



2.Evolve support from emergency response to sustainable interventions


Only 13% of employers believe they have the right support in place. 


 If last year was about scrambling an emergency response.  This year, employers have the opportunity to plan support over the longer term.  Work out a sustainable investment that dovetails with and compliments emergency response measures.

The majority of employers plan to achieve this by reviewing pay and reward (69%) including employee benefits (47%).  And focus on squeezing the most value out of the support they offer through an internal communication campaign (42%), training managers to better support employees through the crisis (35%).  A quarter of employers will review their financial wellbeing policy and support to build financial resilience across the workforce.

Action: Identify win: win solutions for the business

Is the support you offer financially beneficial to the business?  Investigate solutions such as the ability to purchase tech, bikes and other high value items through a salary sacrifice scheme which offer tax an NI efficiency.



3) Understand and communicate business impact to senior leaders


68% of employers say productivity and engagement remain the same


 So far, the cost-of-living crisis doesn’t appear to be having a negative impact on productivity or engagement in the majority of organisations. The greater concern for employers is meeting employee expectations in a competitive recruitment market that favours employees.  The need to retain and attract staff is uppermost in employers’ minds.  This will require a relentless focus on providing an excellent employee experience this year.

Action: Rethink support through an employee experience lens

Last year employers rightly focused on getting more money into people’s pockets.  This year there will be an equal emphasis on providing excellent leadership, management, employee recognition and other factors that influence whether an employee has an all-round great experience of work. 

Reposition the provision of support with senior leaders as critical to retain and attract talent.



4) Measuring impact


 78% of organisations will measure the impact of the cost-of-living this year


With tighter budgets and greater competition for talent, HR can expect greater scrutiny from leaders on the impact and effectiveness of support on employee retention and experience.  HR is responding by adding new measures to develop a more holistic understanding of the impact the crisis is having on their people and the business. These will focus on employee wellbeing - financial including impact on mental health (78%) and physical (48%). As well as factors that influence employee experience - satisfaction with employee benefits (51%), effectiveness of employee communications (45%), happiness with quality of life at work (35%), satisfaction with manager, motivation and job satisfaction (34%).

By paying close attention to impact employers show they are listening and can find new interventions that make a difference to employees. 

Action: Develop a plan to report on the impact of the cost of living crisis

Identify what evidence you need to gather to demonstrate impact and return on investment for both employees and the business.  Given the sensitive nature of asking people questions relating to personal finance take time to research and discuss the most appropriate way to gather and report on potentially sensitive information. 



5) Promote and protect HR’s contribution


64% of HR professionals say their role made a positive difference to employee wellbeing and performance


As with the pandemic, the cost-of-living crisis continues to enable the HR profession to demonstrate the positive impact it makes to employees working lives and the business. Over half (54%) believe people see the work HR does as critical to business performance and realise supporting employees delivers a commercial return.

Action: monitor impact on HR

Half of HR professionals say supporting staff through the crisis has increased their workload (49%) and a quarter report feeling emotionally overwhelmed (26%).  As supporting staff through the crisis becomes embedded in business as usual it will be increasingly important to monitor the impact on workload and wellbeing of HR colleagues.  

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