Business psychology services

Business psychology services

Low Financial Resilience is Forcing Requests for Pay Rises

Inflation is making it harder for households to afford energy bills, food, mortgage repayments and rent. ONS data* reveals that in the year to Nov 22:

·     Electricity prices rose 65.4%

·       Gas prices rose 128.9%

·       Food & non-alcoholic drink prices rose 16.5%

Managing this rise in essential costs takes more than carefully budgeting or shopping around.

Back in May 2022, the Financial Conduct Authority reported that 24% of the UK population had low financial resilience**. They may have been making ends meet, but they had little or no savings to cover unexpected costs or significant price rises.

As a result, rises in the cost of living mean tough decisions; turning the heating off or borrowing money to keep a roof over their head. Faced with these dilemmas, the obvious answer is to ask for a pay rise. Pay increases are falling short of the rise in inflation, but what if you can’t offer more?

Businesses Are Not Immune to Rising Costs

The issue is that businesses are also affected by rising prices. The cost of supplies and energy bills apply to companies as much as their employees.  Higher-priced supplies have led to tighter profit margins and cost-efficiency measures in every industry. This means that, even if you are aware of the struggles that employees face, you can’t afford to bump up wages.

So, are there alternative ways in which you can support your team with the cost of living?

Support with the Cost of Living

There are ways in which your business could help employees to be in a stronger financial position without pay rises in line with inflation.

1. Pre-tax Deduction Schemes

Some schemes allow employees to make payments from their wages before tax is deducted. These include pension contributions and childcare vouchers – are your staff benefitting from these?

2. Arrange Financial Advice Workshops

Providing employees with the opportunity to access financial advice can improve financial management and make them aware of any benefits they might be entitled to. By giving employees time off to attend workshops or meetings, you can help them to prevent, or get out of, debt.

As an alternative, you can signpost employees and customers to debt advice organisations including Step Change and Money Helper.

3. Offer Wage Draw Down in Exceptional Circumstances

Unexpected costs can be the thing that pushes people into the red. A repair to the car or a replacement washing machine can be difficult to pay for if your budget is tight. What can help in these situations is the possibility of receiving a partial payment of wages before payday.

Referred to as Payment on Account of Earnings by HMRC, wage draw down is usually offered for exceptional circumstances; as a means to cover emergency costs. It can help individuals to ride the storm and avoid borrowing money with interest which can make their financial position even more precarious.

4. Hold Weekly Breakfast Meetings

Provide breakfast at weekly staff meetings. The availability of fruit, bread and cereal for all to enjoy, offers a means of fuelling up individuals that may not be eating well. There is no stigma attached, as everyone can tuck in, but this move could improve the health, well-being and productivity of staff.

5. Provide Overtime Opportunities

One option that enables you to increase wages is to create overtime opportunities. Is there sufficient work to invite employees to start their shifts earlier or work weekends?

6. Consider an Employee Discount Scheme

As an alternative to a pay increase, you may have the option of cutting costs. You might offer a staff discount on your goods and services, collaborate with other organisations or sign up for one of the national employee discount schemes.

7. Make Social Events Optional

After-work drinks, secret Santa, fundraising or collections for team members who are leaving should all be optional. The money required to participate may not be much, but if people are counting their pennies, it can be a cost they can do without. If someone declines, ask no questions and don’t pressurise them into taking part.

Cost-effective Solutions to the Cost of Living

All of the suggestions mentioned above are ways to support employees through difficult times, without crippling the business. If employees understand that there are other options on the table and you are concerned for their well-being, they feel rewarded. This encourages staff retention.

As a business psychologist, focused on employee well-being, I understand that financial concerns impact workers’ health, productivity and potential. By acknowledging the cost of living rises and supporting financial resilience, you will benefit from a more successful team.

* https://www.ons.gov.uk/economy/inflationandpriceindices/articles/costofliving/latestinsights

** https://www.fca.org.uk/data/financial-lives-2022-early-survey-insights-vulnerability-financial-resilience

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