The UK is experiencing the worst cost-of-living crisis in decades, with the annual rate of CPI inflation increasing by around 10% in the UK in 2023. In winter 2022, a YouGov survey, found that over 60% of employees said they were keeping up with all their bills and credit commitments without difficulties. However, one year later, this proportion had fallen to under 50%. It is clear that the result of inflation is that far fewer employees are managing to cope with their bills.
Several key factors are driving up the Cost of Living: -
Inflation: As the cost of goods and services increases due to inflation, the purchasing power of individuals diminishes. This means that every pound buys less than it used to, as people spend more money on essentials like food, clothing and utility bills.
Housing Costs: One of the most significant contributors to the rising cost of living is housing. In urban areas, skyrocketing rent and property prices are forcing people to allocate a larger portion of their income to housing expenses.
Education: The cost of education, from preschool to higher education, has been steadily climbing. Student loan debt has reached record levels, affecting the financial future of young adults.
Transportation: Expenses related to transportation, including fuel prices, vehicle maintenance, and public transportation, are on the rise.
Some people may be in a position to try various strategies to navigate the rising cost of living, including: -
Budgeting: Create a detailed budget that tracks your income and expenses. This can help you identify areas where you can cut back and save money.
Save and Invest: Start saving a portion of your income and consider investing to build wealth and protect your financial future.
Live Within Your Means: Avoid overspending by living within your means. Prioritise your needs over wants, and resist the temptation of excessive consumerism.
Explore Housing Alternatives: If housing costs are a significant concern, consider downsizing, relocating to a more affordable area, or exploring alternative housing options such as co-living or renting.
Transportation: Carpool, use public transportation, or explore alternative forms of commuting. Keep your vehicle well-maintained to prevent costly repairs.
Increase Income: Seek opportunities for career advancement, side jobs, or freelance work to supplement your income.
However, these options may not work for everyone and this is where employers can help. Employers have a crucial role to play in supporting their employees during a cost of living crisis. Here are 15 Practical Solutions for Employers to Alleviate the Cost-of-Living Crisis for Employees: -
Competitive Salaries and Raises: If the company is in the position to do so, it could ensure that employees receive competitive salaries that keep pace with inflation. Periodic salary raises or cost-of-living adjustments are vital to help employees maintain their standard of living.
Flexible Compensation Packages: Offer flexible compensation packages that allow employees to allocate a portion of their income to benefits like healthcare, retirement savings, and transportation, reducing their taxable income and increasing their take-home pay. Some employers allow their employees to sell unused holiday days in exchange for a PAYE payment to the amount of the unused time.
Remote Work and Flexible Schedules: Implement remote work policies or flexible scheduling options, which can reduce commuting costs and improve work-life balance for employees.
Subsidised Commuting: If remote work isn't feasible, consider offering transportation subsidies, such as discounts on public transportation or assistance with commuting costs such as season ticket loans, to help employees offset the expenses.
Financial Wellness Programs: Provide financial wellness programmes and resources to help employees better manage their finances, make informed decisions, and plan for the future.
Education Assistance: Offer education assistance programs that help employees access affordable education and professional development opportunities, reducing the long-term impact of rising education costs.
Employee Assistance Programs (EAPs): EAPs can offer confidential counselling, legal advice, and financial consultations to help employees cope with personal and financial challenges.
Healthcare Benefits: Explore private medical insurance and wellness programmes to improve staff help and ensure continuity of healthcare with the well publicised NHS waiting lists issues.
Paid Time Off: Ensure that employees have access to paid time off, sick leave, and parental leave to handle unexpected financial crises, such as medical emergencies or family needs.
Bonuses and Incentives: If the company is in the position to do so, it could consider offering performance related bonuses and incentives that are adjusted for inflation to recognise and reward employees for their performance and dedication.
Mental Health Support: Promote mental health awareness and provide access to mental health resources to help employees cope with stress and anxiety related to financial challenges.
Retirement Plans: Encourage employees to participate in retirement savings plans and consider matching contributions to help them secure their financial future.
Employee Feedback and Communication: Maintain open lines of communication with employees to understand their needs and concerns related to the cost of living. Regular surveys and feedback mechanisms can help tailor support initiatives to their specific challenges.
Community Resources: Connect employees with local community resources, such as food banks or assistance programs, in cases of extreme financial hardship.
Management Training: Equipping line managers with the tools, strategies and understanding to be able to support employees who are struggling with their mental health due to financial concerns is an excellent way to sustain a positive culture that helps with staff morale, retention and engagement.
By taking these steps, employers can demonstrate their commitment to the wellbeing of their workforce and help employees better navigate the challenges posed by a rising cost of living. In doing so, they not only improve employee morale and retention but also contribute to the overall financial stability of their teams.
What is clear, is that the cost-of-living crisis is causing a great number of employees to experience financial difficulties that is likely to negatively affect their mental health. This has been proven to translate into issues with attendance, engagement and performance at work. This is particularly challenging as not all employees talk about mental health, or are even aware of their own mental health struggles, and symptoms are not always obvious. Line managers may be aware of the symptoms of a particular employee’s health issue, but may not know how to have a conversation with the employee or communicate the concern to HR. In some cases, employers avoid asking questions due to lack of education around how to handle mental health struggles.
It is important that managers are trained to spot mental health symptoms and understand the importance of informing HR. More importantly, knowing how and where to signpost someone so that you can encourage them to access the right support is invaluable as a line manager and for company culture.
Please get in touch to learn more about what Enhancing Minds can offer your workplace to help your employees navigate financial wellbeing challenges during the cost-of-living crisis.
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