What employers need to consider when it comes to helping employees during the cost of living crisis
For employers, external recruitment pressures, retention pressures and wage inflation challenges are becoming increasingly difficult to manage.
Inflation has surpassed wage increases and things are getting increasingly difficult. It is difficult to escape seeing various initiatives to respond to the rising cost of living and the impact it is having on employees’ financial wellbeing and their drive for increasing their pay.
Some organisations are better placed than others financially to respond to the growing wage pressures. It is unfortunate, as the divide between salaries in some sectors is becoming more exaggerated. Again, it is difficult to escape headlines of 6%-9% pay increases against the backdrop of strike action for proposed wage increases that do not come anywhere close to inflation.
Employers will need to limit the reactionary ad hoc adjustments and take a step back and think about their pay strategy and have a more considered approach. This does not mean to say it can not be agile, but it needs to avoid creating problems down the line that you can not undo.
So, what can employers do?
1. Consider your whole pay strategy.
• Is it competitive?
• Is your pay stance consistent across all employees at any level?
• Is pay is fair and appropriate for the role, level, and experience?
• Check what your minimum pay looks like - is there a clear separation between the haves and have-nots? What can be done about that?
• When you have adjusted salaries, did it go to employees that needed it most?
• Have you paid new hires more generously than current employees?
2. Do you have a cohort of employees that could potentially be below the minimum income standard? This is not the national minimum wage, this is whether an employee is effect ‘in-work poverty’. This is a serious situation where employees are not earning enough to ‘participate in society’. Do you know if they are doing enough hours, can you offer more?
3. It is more than money. Employers can claim tax relief on mileage, so could you reimburse mileage for employees that use their cars to get to work?
• What other benefits can you apply to make the employee feel better off in their pay packet? Salary Sacrifice on pensions, bikes, and car schemes. Selling holiday days, which gives cash instead. Discount schemes, shopping gift cards, fuel cards, medical cash plans, salary drawdown and loans.
• Can you extend the benefit to include family/dependents? You will be surprised by how much of an effect that can have.
• Can you provide transport, a bus to and from the train station or from the town centre?
• Provide lunch, breakfast, and snacks?
4. If the benefits are already available, remind your workforce, communicate the benefits that will make a difference to them, and think about protection, security, reassurance, and affordability. They may have forgotten to claim for spectacles, for example – it all adds up.
5. Think about your hiring practices and your organisational structure. Do you need to hire like-for-like roles? Do you need to hire at the same level? Can you accelerate promotions?
6. Some clients have pulled forward their next annual pay review. It is a good news message as the employee benefits from additional months increases over and above what they would likely have got at the pay review.
7. Can you leverage your recognition schemes, perhaps increasing the maximum award or the budget to line managers? This is a simple tool to help boost morale.
Other monetary options
8. There are other monetary options that companies have adopted, but some of these need careful consideration as these can potentially cause morale issues among employees:
• Counter-offers to employees who have another job offer
• A one-off bonus
• ‘Golden hello’ payments
• Enhancing benefits beyond salary
• Awarding equity beyond the typical senior levels
• Share save scheme
Anything an organisation can do will help, from the most ingenious cost-effective benefits for the employer, but high impact for the employee, to the straightforward, no-nonsense, costly, cash.
Whatever you do, aim to consider what your pay environment or implications may look like in 18 months to three years. And ensure you can stand behind it. If you are giving higher pay increases to employees on lower wages, communicate that and explain why – your employees will be more supportive of that than a senior manager receiving a one-off bonus or large pay increase, for example. Whether you have a substantial pay pot or not, your approach needs to be inclusive, have purpose and be considerate.
In partnership with Innecto Reward Consulting
We have more than 20 years' experience in getting employers' pay and reward working harder for them.