3 ways to help staff through the cost-of-living crisis
With UK inflation reaching a 40-year high of 11.1%, it is fair to say that everyone is feeling the pinch. As companies decide their budgets for 2023, they must be mindful of not only the economic realities they are facing, but also of those faced by their employees.
Deciding on a budget is difficult at the best of times. Against the backdrop of a cost-of-living crisis, it is even harder. So businesses must strike a fine balance between operational efficiencies and investing in a long-term strategy.
Here are three of the most important considerations when it comes to planning a budget in the current climate…
1. Making sure people are still paid fairly
Salaries are a sensitive subject. While it may be tempting to enforce restraint given the current economic situation, it is important that employers still show empathy towards their staff. “Everyone is facing an increase in food, utility and transport prices,” says Lauren Harvey, assistant accounts manager at The Accountancy Partnership. “And employees deserve to be rewarded for their commitment – especially during difficult periods.”
Paul Fraser, the executive director of Cynergy Business Finance, suggests that the key to creating a highly engaged workforce, which is “more likely to lead to higher profits in the longer term”, is paying people enough to take the issue of money off the table. “If workers feel comfortable in their home life,” he explains, “they’ll perform better at work.”
Claire Trachet, the CEO of business advisory Trachet, says rather than getting worked up about the short-term expense of pay rises, companies should view these as an investment for “when the current conditions cool down”. As people may be exploring opportunities for higher pay elsewhere, she points out, it is better to be proactive in order to keep hold of your most valued staff.
Most people do not lack perspective and will not ask for “unrealistic” wages, she adds. “Really supporting your employees will incentivise them to stick around at a time when the recruitment landscape for the best talent has become very competitive.”
2. Practical perks and benefits
Of course, depending on profitability, not every company will be in a position to offer blanket wage hikes. But even a show of solidarity, suggests Luke Ladyman, the CEO of online payments platform Cheddar, could still go a long way. “A short survey or questionnaire,” he says, “can help better understand if employees are impacted by the cost-of-living crisis. If long-term pay rises aren’t possible, maybe companies could consider gestures that make a difference, such as covering the cost of travel for a number of months, or a one-off bonus or subsidy this Christmas.”
Companies should try to limit “fixed costs” and “avoid multi-year commitments” on subscriptions or memberships, says Trachet, “which may seem cheaper but always end up being more expensive in the long run.” Instead, she suggests, businesses should concentrate their perks and benefits funding on more practical support, because this is what really matters to people.
“Perks and benefits are an interesting solution,” she says. “Generally speaking, they can be good if they are redeemable. If you have a coupon-style perk that is for a choice between wine and a spa massage, in the current conditions most employees are not focused on this. People are thinking about essentials, therefore coupons constituting a broad range of day-to-day expenses would be best.”
More superficial perks, Harvey agrees, are an easy cutback to make. “Businesses should look at what non-taxable benefits they can offer,” she adds. “These could include free or subsidised meals on the [office] premises, or child care vouchers that can ease the strain on employees’ finances. It’s important that businesses of all sizes offer benefits that appeal to a diverse workforce. Not everyone appreciates a beer tap or a ping pong table, and others may prefer more generous pension contributions. Striking a balance is key.”
As with salaries, Ladyman says a longer-term perspective can be beneficial. Where perhaps subsides or vouchers are not immediately possible, he says, offering equity in a company, is an effective way of engaging staff. “Share options will encourage the right type of individuals to join the business,” he says. “They will be more aligned to the company’s goals in the long term.”
3. Internal training and development
While money is undoubtedly a motivator, it is not the only one. Central to employee engagement is the feeling that they are getting better at something and learning new skills.
In 2021, a report by recruitment consultancy firm Monster, found that 95% of UK workers were considering changing their jobs, but nearly half (45%) would be prepared to stay in their current role if their employer offered them new training or promotion opportunities.
“Training is key to staff retention,” Harvey stresses. “It can also happen on the job and doesn’t have to be paid for with an external supplier,” she highlights. “Don’t forget that certain training costs can be tax-deductible. If the training is for enhancing or refreshing purposes that directly relates to the business’s existing income, this can actually be put through as a business expense.”
Sometimes spending money can save money
Budgeting should be devised using an index of cost versus value and with a long-term mindset. Although certain sacrifices and scaling back on perhaps some more indulgent expenses will be necessary, Trachet says, even in a recession, it is important that businesses still understand the need to spend money on the “right things”. A failure to do so, she warns, puts a company at risk of playing catch-up later down the line.
While perks and benefits “cannot directly substitute salary”, Fraser notes, “they can work to complement it.” Where a £5,000 pay rise is not feasible, perhaps £2,000 worth of “targeted cost-of-living support” is a more eminently viable alternative.