How will the cost-of-living (COL) crisis impact your employees in 2023?
There’s a cost-of-living crisis, and more employees than ever are struggling to cope. Should you give a pay rise, or are there other ways you can help?
Although the Bank of England expects inflation to ease in 2023, it will be quite some time before consumers start feeling financial relief in their pockets. Your employees are going to continue to feel the pinch through 2023, and this is likely to affect their outlook in the workplace in several ways.
Here are some of the likely impacts of the COL crisis on your employees, and where relevant some ideas on how people management teams can respond constructively.
Employees leave for better pay.
UNUM Provident recently published some commissioned research that showed that ‘19% of employees expect to have to look for a new job with better benefits or a higher salary in 2023.’ That’s just over 5 million employees!
The good news is that there are quite specific steps that may be taken to address this risk, especially since the UNUM research revealed that 35% of workers claim they have not been provided with any COL support so far by people management, pointing to some low-hanging fruit.
COL-linked pay-rises are an obvious solution – and are making the news for this reason, but a strategy built around improving working conditions and benefits should also be considered as an equally effective means of retaining staff. (The NHS and Rail strikes and even Amazon’s recent industrial action are not just about pay but also about working conditions. ). Pay-rises are not the only olive branch: for example, increased flexibility around working hours/location can lead to reduced commuting and childcare expenses. This can be of equivalent or greater economic value than a pay rise to some employees and could therefore have an as big impact on staff retention as a pay rise.
Be creative and tailor your COL response to suit your specific situation for the best ROI.
Second job to make ends meet.
According to a separate survey by Royal London Insurance, 16% of employees are reacting to the COL crisis by considering taking on another job in 2023 if the situation remains the same. They aren’t doing this lightly; it seems that a third of workers are having to borrow or use their bank overdraft to function and 54% say they are overwhelmed.
Legally, people management protocols can’t prevent workers from taking a second job. It doesn’t make sense to attempt to do so anyway, considering the impossible economic circumstances which they may face, unless of course double jobbing is affecting productivity or poses a conflict of interest. In these circumstances, relevant people management processes can and should be invoked to address the issue.
Cost-of-living pressures create financial confusion.
Your employee’s mental health is being severely impacted with nearly half of the employees saying their current financial situation was negatively affecting their mental health. A fascinating article in the FT says the main questions asked of their financial experts about the COL aren’t specific, it seems that people are simply overwhelmed about their finances and don’t know where to start!
Those responsible for people management need to know that many employees – particularly lower-paid ones – have a sense of panic. But it is also beginning to impact middle earners, and many are facing financial decisions they don’t feel qualified to make.
This sense of confusion around finances may best be remedied by giving the employees time and support to take a step back and take a cool calm look at their finances. Given the levels of financial bewilderment being generated by the COL, employer-sourced expert advice around debt management, cost control, and financial planning may be more (or just as) useful as a pay rise.
You could also consider investing in HR software like SenseHR, which reveals more financial insights to employees, e.g. by calculating their gross payroll figure and showing them how much they’re earning as they go along.
Supporting physical fitness
More interesting research from PWC has found that 31% of your employees, particularly those between the age of 18 to 34 (39%) are planning to exercise more over the next year to support their health and well-being over this difficult time. They noted that over half of the younger generation are cancelling gym memberships to save money. Therefore, if people management professionals could find ways to offer subsidies/benefits relating to exercise this is likely to be well-received by employees. Something as simple as an onsite shower and/or changing rooms could facilitate cardio-commuting to work and or exercise during lunchtimes, which research shows will actually increase productivity!
PWC’s research made the interesting finding that nearly half of the people have reduced the amount they eat out, and this presumably feeds through to lunchtime spending at work. Given this impact, people management teams can respond in quite a helpful way by improving the office’s self-catering and food-prep facilities where relevant. Simple additions such as a kitchen area, pizza oven, and more sitting space, etc… may support your employees, helping them to self-cater in a more cost-effective yet hospitable way.
As you can see, the way that employees are being affected by the cost-of-living crisis varies according to their economic status, age, financial literacy level, length of commute, and many other factors. It would be folly for people management to ignore the effects on their employees as it is affecting their mental health and productivity, and if left unchecked can lead to increased employee turnover.
It can seem that the only way to address these problems is by giving pay rises, but this is just one of many interventions and does not always give the best return on investment. Other lifestyle interventions used appropriately such as financial literacy advice, support around flexible working, providing self-catering facilities, and onsite showers, may for a similar financial outlay as pay rises deliver greater returns for employees and employers.