With inflation at 10.1% – and projected to rise even further to 22.4% if the energy price cap increase goes ahead – it’s clear that the cost-of-living crisis is causing the largest drop in real income for over 50 years.
It’s a difficult time for everyone, but it’s not just consumers who are feeling the pinch; businesses are too.
People’s finances are the biggest source of stress in the lives of the majority of full-time workers in the UK. As such, employers have a big part to play in making sure their workforce’s financial wellbeing survives the months ahead. Failure to do so could have significant implications for the performance and mental health of many employees.
Therefore, businesses must develop new plans to help them better support their employees. For managers, and HR managers in particular, providing their staff with a pay rise to help them cope with their rising household costs may not be possible due to constraints on the company’s purse.
Here are a few ways in which they can support their staff.
Financial education
For anyone to successfully navigate the difficult economic landscape that we are currently facing, financial education is key. However, most schools don’t focus enough on financial literacy, so employers must provide their employees with the tools to close any knowledge gaps that they might have.
It can be challenging to motivate employees to increase their financial literacy. That said, employers can make the task less intimidating for their staff by offering supplementary financial education workshops and programmes to equip them with the knowledge and skills they need to make better financial decisions. Distributing helpful resources and tools is an excellent place to start, at the very least.
Taking this concept a step further, providing staff members access to private consultations with financial advisers or financial advice charities can enable staff members who are hesitant to address their financial concerns in front of co-workers to do so in a more private situation. Making financial advisers easily and openly accessible would likely be helpful in this regard.
Breaking the ‘money taboo’
As mentioned above, some staff members may not feel comfortable discussing their financial situations with colleagues. As such, it’s vital that managers attempt to break down the so-called ‘money taboo’, with multiple studies finding that simply speaking about monetary concerns can ease financial stress.
Increasing conversations about personal finance at the top of the organisation is one method to achieve this. For example, if more senior members of the organisation spoke more freely about the importance of financial wellbeing in meetings or internal communications, it could have the benefit of creating a supportive environment that allows their staff to speak freely about any issues that might be affecting them.
Additionally, managers could look into improving the flexibility of pay evaluations in order to better meet the needs of their staff. For instance, many employees would benefit from having their salary reviewed before their energy bills rise by £1,600 in October. Indeed, rigid annual pay review procedures could be detrimental to employees’ financial and mental welfare.
Wellbeing platforms
During a short-term crisis like the one we are currently facing, it can be easy to ignore the importance of long-term financial planning.
Managers must be able to provide their staff with the necessary tools to keep track of their short-term finances and plan for the future. With this in mind, managers could consider making a financial wellbeing platform available to their staff.
These platforms provide employees with features such as speaking to a financial adviser for free, as saving benefits and pension tracking services, which could seriously enhance their financial wellbeing in the future. Similarly, if employees are able to access a dashboard that allows them to see their savings and investments in one place, they can get a much clearer picture of their financial lives.
Consequently, when difficulties arise in the short term, like the cost-of-living crisis, employees can make decisions about their money with confidence because they’ll know that they have a strategy to remain secure in the long run.
Promoting pensions & salary sacrifice schemes
Another way of securing employees’ financial wellbeing during the cost-of-living crisis and in the future is to promote the company pension scheme.
Managers can no longer simply enrol their staff in autoenrollment programmes without providing any additional information or resources. Instead, a pension dashboard that is easily accessible and enables employees to interact with their pension plan will undoubtedly boost both engagement and financial security.
Simultaneously, managers can empower their staff to take financial control by enabling them to view the amount of savings in their pension pot and manage their contributions on a month-by-month basis.
The cost-of-living crisis is also a great chance to spread the word about HMRC’s salary sacrifice pension programme, which can help employees (and employers) save money on NI contributions and income tax. Employers’ NI costs can be reduced by using the salary sacrifice pension plan, and employees will also receive higher take-home pay because they will be paying lower NI contributions.
As always, businesses must evaluate all of their options before deciding how they will best support their employees during the cost-of-living crisis, and it doesn’t always have to involve a significant financial outlay.
By discussing employee financial wellbeing and promoting the financial options available to them more, managers should hope to support their employees and maintain motivation and productivity. Therefore, managers should accept the challenge of guiding their teams through these trying times as the cost-of-living crisis worsens.
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