It’s clear from the Autumn Statement that 2024 will be another financially challenging year for many employees. Despite positive soundbites from the Chancellor about tax cuts, experts warn the UK faces a record high tax bill.
Many people on average salaries have been moved to a higher tax bracket, reducing take home pay. And after two years of inflated costs, most households don’t have any fat to trim, or few savings left to cope with another year of financial stress.
Added to which, spending on public services has been cut in real terms, meaning we can expect waiting times for GPs, dentists, hospitals to grow. As a result, employees may not be able to access healthcare treatment in the early, treatable stages. Working parents desperate for affordable childcare will have to continue paying exorbitant costs for both parents to stay in work.
In reality, the Office for Budget responsibility warns living standards will be 3.5% lower in 2024-25 than before the pandemic. In effect we are seeing the biggest drop in real living standards since the 1950s.
For employers, this means supporting the financial wellbeing of staff well into 2025 will remain a top priority. Even before the Autumn Statement announcement, 824 HR leaders told us, the cost-of-living crisis would have the biggest impact on employee performance next year. Inevitably, this is having a negative impact on business performance.
Nearly two thirds of employers (64%) said they were struggling to retain staff, a similar number (62%) reported falling levels of employee engagement, 39% were getting more requests for additional financial support and a third (33%) said their employees had taken up second jobs or side hustles.
While the majority of HR leaders (64%) belive their organisation had a duty to help empoyees with the cost-of-living crisis, 54% said they had to compromise between the support they wanted to provide and their ability to affford it. Investment-wise, over half of the busineses (55%) we spoke to are balancing the need to support the financial wellbeing of staff with preparing their organisation for the impact of AI and automation. They said this will be the top area for investment next year.
To achieve this balance, employers will need to find low cost, effective means to boost employees’ overall financial position and support their wellbeing. Last year many employers awarded pay rises and one-off payments. Clearly this isn’t a sustainable solution over the longer term.
Instead, HR will need to explore a wider range of options to retain, motivate, and engage people. While every organisation will need a long-term strategy to drive employee performance in uncertain times, they also need tactical solutions that provide a rapid response to emerging challenges and opportunities.
4 actions HR can take today to ensure financial wellbeing support is effective
- Start by reviewing the support you have in place to drive financial wellbeing, engagement and performance. Does it align with the way the business works or do you need to make changes?
- Similary, review your reward and incentives offer. Does it reinforce company values and encourage behaviour that underpins business success or do these require a tweak to drive new behaviours?
- 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.
- 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.