Analysis of the spring budget indicates 2024/25 will continue to pose financial problems for individuals and the country as a whole. Public sector HR teams must review support for employees who will face personal financial challenges, plus the prospect of delivering services with fewer resources.

Despite tax cuts in the budget, the Institute for Fiscal Studies said that households will be worse off this year than at the start of the current parliament. Public sector employees, alongside all other areas of the workforce, will see a higher proportion of their salary taken in tax which will not be compensated by a reduction in National Insurance contributions. The pressure of the cost of living remains real.

Public sector employees will also operate in a challenging environment this year. The chancellor broadly maintained spending on public services at the same level announced in the autumn 2023 statement. But bodies like the Institute for Government have warned that most public services are already performing worse than before 2020 and ‘significantly worse’ than in 2010. Flat budgets confirmed by the announcement mean we are unlikely to see substantial improvements in this level of performance anytime soon. Pressure on public sector employees to do even more with less will rise accordingly.

In the near future, we could also see more local authorities issue section 114 bankruptcy notices. This could mean we will see further cuts to services – making it even more difficult for employees to deliver services effectively while staying motivated.

Implications for HR and the steps you can take

Public sector HR teams must now renew their focus on employee motivation, engagement, and retention. They will also need to continue to build financial wellbeing support and help employees save money where they can.

There is no doubt the task is significant – and one that HR leaders are already aware of. Even before the budget announcement, 824 HR leaders across the public and private sector told us the cost-of-living would have the biggest impact on employee performance next year. Nearly two thirds of employers (64%) also said they were struggling to retain staff, a similar number (62%) reported falling levels of employee engagement, and 39% were getting more requests for additional financial support.

The focus, now more than ever, must be on fostering a positive workplace culture despite the most trying of circumstances. The goal must be to ensure that public sector employees remain committed to their roles and their mission.

Here are 4 actions HR can take today that will help

1. Start by reviewing the support you have in place to drive financial wellbeing, engagement, and performance. Does it align with the current environment, or do you need to make changes?
2. Review your reward and recognition offer. Do you have the flexibility to provide instant, personalised rewards so that teams and managers can recognise people who are going above and beyond?
3. Ask employees whether current support is effective. What areas of financial wellbeing do they most need help with? Check your support covers all bases from discount schemes that enable employees to save money on everyday items through to Employee Assistance Programmes to help any employees in financial distress.
4. Prepare a communication schedule that will enable you to remind employees on a regular basis throughout 2024 of the support available, how it will benefit them and how to access it.