6 practical actions to support employees through the cost-of-living crisis
Rising costs have dominated news feeds for months now, as the financial resilience of employees is pushed to breaking point by rising costs. A July 2023 Which? study classed 15% of the UK population as ‘Anxious and At Risk’ - having been largely overlooked by government support, they're struggling to keep afloat and have been increasing their debt in the last 6 months to do so. Even employees on higher incomes are experiencing a drop in discretionary spending, and a knock-on impact on their standard of living.
In 2022, we published a cost-of-living crisis special report to highlight how employers are uniquely placed to support employees through the benefits package – and unsurprisingly, this was our most downloaded report of the year. At the start of the year, we hosted a roundtable discussion in London where we were joined by 14 senior global reward and benefits leaders from companies such as AND Digital, Zoopla and Arqiva, as well as panellists Ridhima Durham, Chief Commercial Officer at Salary Finance, and Daniel Crook, Protection Sales Director at Canada Life .
The theme of the discussion was: From crisis to comfort: Supporting employee financial wellbeing through the cost-of-living crisis. We discussed the actions companies are taking to help give their people more confidence and control when it comes to their finances – from better leveraging the benefits toolkit, to the importance of clear communications, protecting against risk and more. These are the top takeaways from our group discussion.
Many employers already have existing tools that can help employees mitigate rising costs – like discount sites and salary finance that employees can lean into. However, our roundtable attendees agreed that putting the right communications strategy in place is key to promote the benefits already in place and educate employees on how they can best use them.
One benefits leader highlighted that they needed to tailor communications based on employee life stage – new graduate employees were concerned about paying rental deposits and rising transport costs whereas director level employees were looking at how to navigate rising mortgage costs. Tailoring their communications to each group and highlighting the most relevant benefits helped them to drive engagement.
When it comes to supporting employee financial wellbeing, having open conversations helps employees get the resources and support they need to build financial confidence. Resources which have proven popular include webinars and short-form digital content, as well as applications like SaveSmart which help employees take actionable steps to improvetheir finances and build more sustainable behaviours; the behavioural element is particularly important given people’s emotional ties with money and spending.
However, not all attendees agreed on whose responsibility it is to communicate benefits, cascade information and support employees – one group had seen success with wellbeing champions whilst another felt mental health first-aiders played a more important role in supporting overall employee wellbeing (not just financial).
Multiple success stories were shared, and attendees highlighted that the right training and structure to these committees is essential. Another attendee highlighted that managers could make a big difference in terms of educating and sharing relevant information as they’re more aware of each employee’s individual situation, including their salary.
At a time when employee trust in their employer is higher than with any institution, it makes sense that they would turn to their employer for support in times of financial crisis. In the face of rising interest rates, finding more affordable ways for your people to service existing debts gives them more control over their finances and supports employees closer to the ‘crisis’ end of the financial scale.
By porting high-cost debt into one single loan offered at competitive interest rates through Salary Finance, employees can start to move from debt into savings. The repayments come out of payroll before the employee sees it, making repayments automatic. There’s also no risk to the employer as the agreement is with the employee and Salary Finance; if they leave the organisation then they take the loan with them.
Our roundtable discussion was joined by Ridhima Durham form Salary Finance who highlighted that they typically see a 10% increase in employee credit scores within the first year because the employee has consolidated multiple debts through Salary Finance. This can help them get a mortgage and 80% of employees who had used payday loans previously don’t use them again.
There was quite a bit of discussion about the pros and cons of providing a one-off cost-of-living payment to help with rising costs over the winter – something several of the organisations in attendance had provided. A common concern was whether this was a one-off or whether they should budget for another payment next year because employees may come to expect this. One organisation that did a spot payment will be focusing more on salary increases in 2023, rather than doing another one-off payment.
Another attendee highlighted that they’d made a payment to help employees through this period (based on two tiers - £30k and £50k), and it had been very well received by employees. As a non-for-profit organisation, they can’t always pay market salaries, but they do a lot around employee support and focus on how these are communicated with employees. The consensus on whether organisations should provide this was dependent on industry and some attendees flagged that these kinds of payments can have unintended consequences in terms of tax and universal credit.
For global organisations, the approach needs to be tailored to different regions due to varying tax rules. Wellbeing allowances, emergency loan funds and rental loans were also discussed as ways to provide extra support to employees who need it most – for example, employees in London who are having to pay three months’ rent up front or who have an unexpected cost like a boiler or car breakdown and don’t have enough savings to cover it.
Offering flexible protection benefits provides employers a unique opportunity to support employees and their families by insuring against key risks. As well as paying out for the long term, income protection has evolved a lot in the last 15 to 20 years. It can offer more immediate support services to employees and prevent them needing to submit a claim in the first place – supporting their physical and mental wellbeing and leading to better employee outcomes as they support employees’ return to work in a sustainable fashion. Some of the services they offer include counselling, virtual GPs, physiotherapy and more.
Daniel Crook from Canada Life highlighted that with the help of their early intervention team, nine out of ten absentees returned to work rather than made a claim. Numerous stories reveal how income protection could be one of the most important insurance products employees will ever own.
One theme that cropped up throughout the roundtable discussion was how to contextualise benefits in a way that make them easier for employees to understand, feel more tangible and make it easy for them take action. For example, rather than using the term pension, talking about pensions as ‘saving for the life you want’ or asking, ‘what kind of lifestyle do you want in the future?’ can get employees to think more about their financial future. Retirement Living Standards does a good job of explaining this in terms that can help employees visualise the kind of future they want to save for. By increasing their contributions and making tax and NI savings via salary sacrifice, employees can set themselves up for a retirement where they can maintain their standard of living. If you’d like to learn more about how your benefits toolkit can support your employees amidst rising costs and improve their financial wellbeing, take a look at our cost-of-living crisis special report.
Author: Gethin Nadin, Chief Innovation Officer, Benefex Originally published on the Reward and Employee Benefits Association blog.
