The past few years have been filled with ‘once-in-a-generation’ events – Brexit and a global pandemic being the headliners. Now, society is facing the current cost of living crisis. Inflation continues to grow rapidly, increasing the cost of everything, from energy prices to butter, at a rate that has not been seen in 40 years. This crisis, against the backdrop of a tight labour market in which there continues to be a high number of vacancies and low numbers of candidates, has created a challenge for employers – how can they support their staff without them looking elsewhere for a new role and a better salary?
What is the impact on business?
Given the increase in the cost of living, more employees may experience poor financial wellbeing and be required to make difficult decisions about their finances. In the worst cases, some employees may be faced with the ‘heat or eat’ conundrum, or afford their rent or mortgages.
Financial wellbeing is linked to both employee wellbeing and performance. A recent YouGov poll suggested that 80% of UK employees believe stress around their financial wellbeing can negatively impact their performance at work. Financial stress also leads to an increase in employee absenteeism. A Centre for Economics and Business research study into the financial wellbeing of UK employees and its impact on productivity estimates that 4.2m worker days are lost per year in absences because of a lack of financial wellbeing. It estimates this amounts to approximately £626m in lost output across the jobs market.
To try to alleviate some of the financial stress being brought on by the cost of living crisis, employers may see an increase in employees who take up second jobs. Unless stated in the employment contract, there is no statutory restriction on an employee taking up a second job. However, if employees are working a second job, it can have an impact on the performance of the employee at their primary job, particularly if they are cumulatively working significantly longer hours. The Working Time Regulations 1998 prohibits UK workers from working more than an average of over 48 hours per week (taken over a 17-week period). If their employees are working second jobs, and this is taking them over the 48-hour limit, then employers should ask their employees to sign an opt-out of this restriction, or otherwise risk potential liability under these regulations. Beyond the legal implications, employers may also want to ensure that, from an employee welfare perspective, taking on an additional role is not impacting their wellbeing unduly.
Employers may also see an increase in presenteeism in their employees. For example, employees may be presenting for work even if they are not well and will not be productive. Employers have also recognised the impact that worrying about their finances can have on employees. The Centre for Economics and Business research study highlighted that 70% of employers believe staff performance is negatively affected when employees are under financial pressure.
What can employers do to help?
1. Review the rewards strategy
In the last 12 months, employers increasing wages has been the most common response to assist workers. In the CIPD Labour Market Outlook for winter 2022-2023, 48% of employers planned to raise pay in order to better recruit and retain staff. This is an increase from 38% last year.
2. Offer flexibility
Employers have also had to consider more flexible working practices in the wake of COVID-19. More than ever, employees are looking for flexibility in their working hours and practices. If employers are not willing to offer flexibility, then employees are looking elsewhere for a new role offering this.
Currently, making a formal request for flexible working is only available to employees who have worked for their employer for at least 26 weeks. Last year the Government introduced the Employment Relations (Flexible Working) Bill which would remove the 26-week qualifying period, meaning employees can request flexible working as a day-one right. This Bill is currently proceeding through Parliament and is expected to be made law in due course.
3. Review the benefits package offered
Employees, particularly the younger generation, are now expecting more from their employers. Employers may wish to consider increasing the benefits they offer to employees, particularly in relation to financial support and education to assist employees through the cost of living crisis. Employers may wish to look beyond remuneration and pension schemes and start to explore offering further benefits such as:
- workplace saving schemes;
- discount schemes with external companies;
- help with financial planning;
- employee assistance programmes providing counselling for employees who require it; and
- salary sacrifice schemes that would allow employees to pay for things such as new technology, gym memberships, and dental and healthcare through payroll.
Supporting employees through economic uncertainty is one of the topics of discussion at this year’s CIPD Scotland Conference on 30 March 2023 at the Edinburgh International Conference Centre.
Harper Macleod will be attending this year’s conference as exhibitors. Members of our employment team will be available at Stand 15 on the day of the conference should you wish to discuss any aspect of the employment relationship with us.
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