How should HR deal with high inflation?
With inflation rates rising and the cost of living crisis booming, HR professionals are asking how they should be responding – in this article, we take a look.
The Bank of England’s recent sharp interest rate rises are an attempt to lower the UK’s soaring inflation rate. But this has deepened the household financial crisis because in response, mortgage interest rates have hit a 15-year high!
What should concern HR professionals are the knock-on effects of this high inflation in the workplace. Many employees are being severely impacted by this harsh inflationary environment, but what can HR professionals be expected to do in response?
According to some recent research by the HR consultancy Gartner, 6 in 10 companies now offer financial education classes to their employees. This is a great starting point.
By helping your employees make better financial decisions you improve their financial well-being, mental health, and engagement. You help to keep them focused on their work and not on fire-fighting financial issues. It’s a win-win.
Of course, the typical HR professional is not trained in financial advice. The good news is that financial education can be easily outsourced and there are many vendors who can offer such classes to your employees.
When doing a Google search, Nudge is one such financial education platform that caught my eye. A closer look revealed that it is used by big brands like Virgin, IBM and Oracle; it’s also very progressive and suited to modern agile organisations as its financial education programme is delivered to your employee’s mobile device via a personalised feed. It can be seamlessly integrated into your existing HR software and you can white label it too so it can be shipped and delivered under your employer brand.
If you want to provide your employees with a more personal touch, then betterwithmoney.com appears a good alternative. They are a specialist provider of independent financial education which follows the more traditional classroom style learning format. However, they can deliver their content in person, via live webinar, or pre-recorded. They are also independent and promise not to try to sell any financial products and services to your employees.
This is just a small taster of what’s available out there and we are not recommending these vendors, but just wanted to point you in the right direction.
As you can see there is plenty of financial education out there but this needs to be paid for. This free Financial and Wellbeing Guide from Mercer, which has been created in specific response to the cost-of-living crisis is a good document to be sharing with your employees also, but you may experience some salesmanship within this document.
Pay rises? But, what about inflation?
When Andrew Bailey, (the governor of the Bank of England) warned that pay ‘could not continue to go up at its current pace if inflation was to fall’ he pulled HR and those involved in pay bargaining into the debate. He also alluded to the fact that since he is expecting inflation to come down this year, wage setting policy should reflect this.
HR and pay bargaining professionals were being indirectly asked by the governor to consider the needs of the national economy alongside the needs of the employee and the employer when setting wage levels. This puts employers and HR professionals in an awkward position: restricting pay rises for the good of the nation may be a tough sell to those employees facing their own personal cost-of-living crisis (COL).
There’s no easy solution although this recent People Management article titled, ‘Pay setting in 2023: how much should you award?’ gave some useful pointers. It’s worth a read all by itself but it makes three suggestions that could help those balance the conflicting needs and pressures of the current turbulent pay rise climate.
- Skew pay rises toward lower-paid workers in order to help those being hit hardest by the COL. Virgin, Natwest, and BT all adopted this approach.
- Make emergency one-off-cost of living payments, potentially targeted at low earners which means there won’t be a permanent increase in the payroll bill.
- Multi-year pay deals (more common in the public sector) which spread out the pay rise over time, reducing the economic impact. The Ministry of Justice and HMRC have adopted this approach.
Increase earning potential of your employees
Another obvious way that HR professionals can help is to increase the earning potential of their employees, which can be done by making more hours available to them, if possible. Alternatively, you could enable them to work in a compressed or more flexible way that makes it easier for them to take a second job within your business, with another employer, or within the gig economy.
Now more than ever the role of the HR practitioner requires a focus on the economic environment and an ability to integrate this thinking into the HR process.