This article was written by Jane Braithwaite and originally posted on Independent Practitioner Today.
For the last few months, one of the top news stories each day relates to the increasing cost of living in the UK. The headline this morning is that inflation has hit the highest rate in 40 years and reached 9% in April 2022. Energy prices are increasing drastically as well as the cost of food, clothing and many other household items. As a result of the increase in inflation, the Bank of England has recently raised the base rate of interest for the first time in many years, putting more pressure on homeowners with higher mortgage payments. With the additional increase in National insurance, this is all putting a significant number of people in the UK under financial pressure.
What does this mean for us as employers?
I think it is safe to assume that most employees would like a pay rise in their current job or they will start to look for a new role with a higher salary. As employers, there is a risk that we will lose staff if we do not take action to support our current employees.
Most employees will be demanding a pay increase at least in line with inflation so that they feel they are at least standing still in terms of their financial wellbeing. But for most employers, the prospect of giving every individual within their company an inflation-based increase is simply not a possibility.
Offering every employee, a pay rise in line with inflation is not only difficult for most employers to deliver, but economists would warn us against doing so for other reasons. I am no expert when it comes to economics, but my understanding is that economists caution us against increasing salaries across the board, which will allow spending to continue at current levels, which will cause inflation to continue to rise resulting in a vicious circle. I am happy for anyone to question this of course, as many readers of the IPT will have a far deeper understanding of the issue than I can claim to have.
Research shows us that one of the most common causes of stress for individuals is their financial well-being and this is going to become a major concern for many more in the coming months and potentially years. As employers, we also appreciate that if our teams are feeling stressed in their personal lives, they are not going to be able to perform to the best of their abilities in the workplace and extreme stress can also lead to a higher absence rate from work, due to ill health.
So, what do we do to support our employees through this difficult time?
If increasing salaries in line with inflation are not possible and not advisable, then what do we do as employers? Maybe the answer is to increase salaries where possible by a margin, not in keeping with inflation, but enough to try to alleviate the situation for individuals, especially for those on lower salaries.
There may be other ways in which employers can help by thinking beyond the immediate issue of salaries.
Several schemes may be relevant to our employees including season ticket loan schemes which aim to help employees where the cost of commuting is a major budget item. Research by the company Employee Benefits confirms that this is one of the most common benefits offered by employers, with 59% of employers doing so. The season ticket loan is an interest-free loan for employees to cover the cost of travelling to and from the workplace via modes such as tram, rail, bus, etc. Some schemes can also be used to cover parking costs too. The loan repayments are paid monthly through the employee’s net pay over a set period.
For keen cyclists, the cycle-to-work scheme could be an attractive possibility. It allows employees to save 26 to 40% on their bikes and accessories. The employee has no upfront payment, and the monthly payments are taken tax efficiently from the employee’s salary by their employer.
During the Covid pandemic, when we were all advised to work from home, if possible, the government introduced tax breaks to help alleviate higher energy bills. From April 2022 this tax break has been tightened and whilst some employees can claim, for many this is no longer possible. Without a doubt, heating costs are higher for those working from home and next Winter this will become more of an issue. If the government is not going to provide support for home workers, then employers may need to step up. For companies who have introduced a working from home strategy, there will be cost benefits associated with reducing the need for office space and a proportion of this saving could be passed on to employees to help with the increasing cost of energy.
A different type of approach would be to offer an Employee Discount Scheme to help employees save money on their purchases. These schemes offer employees discounts for products and services that they are likely to buy regularly. For example, one company called PerkBox offers discounts at Sainsbury’s and M& S.
The final suggestion is to help employees manage their finances more effectively by offering access to support services and financial training. There are lots of organisations and training providers offering such support and these could prove to be very helpful to some employees. This type of approach needs to be handled with extreme care to avoid any suggestion that employees are being judged or criticised. Over the last few days, we have seen numerous politicians slated for their comments regarding individuals being unable to budget and unable to cook. Yesterday it was suggested that individuals solve the issue by taking on extra hours or an extra job. All of these comments appear tone-deaf to individuals who are working hard just to keep their heads above water!
Again, I repeat that I am no economist, but everything I hear and read suggests that the cost-of-living crisis is going to be a long-term issue and so, as employers, we must do what we can to support our employees. One obvious solution for our employees will be to move to a better-paid job and so if we do not take action our biggest issue will be a recruitment crisis, which is time-consuming and expensive. Retaining our employees by supporting them will prove to be the best option for both employer and employee.
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MD of Designated Medical
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