CIPD Voice On…cost-of-living support, by Charles Cotton, CIPD's senior policy advisor on performance and reward. 

Inflation in the UK is near boiling point, and so is the financial situation of workers in the UK. In a sign of things to come, our recent survey of UK employers reveals that most (72%) expect their workers’ financial situation to worsen over the next 12 months.

November’s Labour Market Outlook (LMO) research showed that 42% of employers are worried about the financial wellbeing of their staff, rising to 56% in the voluntary sector and 46% in the public sector. We expect this concern will only increase over the coming months (as inflation keeps on growing). The question is: what are employers doing about it?

Most employers (51%) said their senior managers are discussing the risk more frequently, particularly in the voluntary sector where the rate is as high as 66%, or in the public sector where it’s 57%. Almost a quarter (24%) report no change in how often this threat is being discussed, while only 6% say that senior managers are discussing it less and 10% not at all.

Rising energy costs are a particular concern. Our report finds most employers (65%) predict that the jump in energy prices will have a negative impact on their own finances, possibly limiting the help they can give to staff in 2023.

In a curious show of uncertainty, the number of employers who are confident that they’ll be able to support their employees’ financial wellbeing over the next 12 months is equal to the number of employers who are not confident – 27%. However, private sector employers felt significantly more confident they could help (32%), compared to public sector organisations (12%).

Increasing wages is the most common response to the cost-of-living crisis

Of the various things employers can do to help their workers, many said they’ve increased wages (36%) or introduced more flexible working (29%). But a number said they’ve also shared financial information and guidance (23%) or highlighted how their employee benefits package can help with rising prices (23%).

Within these responses, there’s little difference by sector. However, voluntary sector employers (48%) and private sector companies (38%) are more likely to pay more than public sector organisations (18%). A similar proportion of employers (14%) have given bonuses/allowances to cover the increase in the cost of living and/or have introduced or improved staff benefits.

Looking ahead, 30% of employers plan to raise wages next year to help, while 20% plan to highlight financial information and guidance. Meanwhile, 18% intend to highlight how their benefits package can help employees with rising prices. Similar proportions will introduce or improve benefits (15%), bring in more flexible working (15%), and introduce bonuses/allowances (13%).

Here are some popular things employers are also doing to provide further financial wellbeing support:

1. Asking staff for their feedback (at least once a year) on their pay and benefits (45%).
2. Actively measuring staff understanding about the pay and benefits on offer at least annually (35%).
3. Encouraging staff to talk about their money concerns in the workplace (34%)
4. Targeting communications about employee benefits and financial education to specific employee groups (33%).
5. Supporting and developing line managers so they can talk to staff about financial wellbeing (31%).
6. Asking workers about their financial wellbeing at least annually (29%).

There are some variations by sector. Voluntary sector employers said they’re less likely to:

• ask for staff feedback about their reward (36%)
• assess employee understanding of their reward (25%)
• develop line managers to talk to staff about financial wellbeing (26%), and
• ask their people about their financial wellbeing (19%).

A key difference between the public and private sectors is that private sector companies said they’re more likely to assess staff pay and benefits understanding (38%) than public sector organisations (26%). Private sector firms are also more likely to support and develop their line managers to talk to workers about their financial wellbeing (33%) than public sector employers (23%).

How employers can make a difference

We encourage any employers reading this to:

• focus on paying a fair and liveable wage
• offer financial wellbeing benefits, and
• providing opportunities for in-work progression.

Ideally, this should be brought together as a policy. Our research finds that 32% of employers have already adopted a policy, while a further 7% plan to create one in the coming months.

Having a policy can bring benefits. Our research highlights that a policy can not only help boost employee wellbeing and work performance, but staff will also take the existence of such a policy into account when thinking about their next job move.