Across Europe and the US, a recession is looming because of sky-high inflation rates. Inflationary related price increases have exceeded 10% in Germany, the UK and the US, while France’s 6.2% rate is the highest in 40 years.
In this challenging economic environment, which is compounded by geopolitical instability linked with the war in Ukraine, individuals are struggling to make ends meet. While they know there are lots of money-saving changes they can all make personally, many are looking to their employers for additional support.
UK wellbeing research by Claro found that 69% of the 1,000 employees surveyed thought their company should do more to support their personal finances, and 55% think their employer doesn’t care about their financial wellbeing.
Therefore, it is no surprise that a report by WorkNest found that HR teams are ranking the cost of living crisis as their number one challenge in 2023 (70%). Other 2023 challenges will include retention (69%), recruitment (55%) and skills shortages (34%).
Claro’s report found that the cost of living crisis and retention challenges are inter-related. One in five workers surveyed said they would leave their current job for a better paid one if the cost of living crisis gets worse. This links with research and US national data showing that despite a looming recession, the ‘Great Resignation’ is going nowhere.
Cost of living solutions
The reason why the cost of living crisis is such a challenge for HR teams is because they are unsure what actions to take, and how to best support their workers without compromising business bottom lines.
Of course, the obvious solution to the cost of living crisis is to give all employees a pay rise. However, it is important to remember that many employers are also struggling financially – price increases don’t just impact individuals, they also negatively affect businesses and their bottom lines.
All of this means that 10% or higher pay rises may be unaffordable for many businesses, and surely it is worse to give a pay rise to some and not others.
Instead, many employers have leaned on cost of living bonuses – examples include Virgin Media O2, plus large British banks, such as Lloyds and Virgin Money.
One issue with bonuses is deciding how much to give, who to give it to, and the fact that employees won’t actually get the full amount as they are subject to tax.
The German government has tried to solve the third challenge by waiving the usual taxes on bonuses to enable employers to step up – France and Italy are considering doing the same thing, but the UK and the US are lagging behind here.
Enter financial wellbeing and EWA
Beyond pay rises and bonuses, other options that employers have implemented are financial wellbeing programs. Claro’s research found that 80% of employees wanted this and it would help their job satisfaction – it will also improve productivity (67% of respondents told Claro their money worries were affecting their performance at work).
Claro’s head of employee wellbeing Stacey Lowman commented: “Businesses have begun addressing the physical and mental health of their employees and now finances are being recognized as a factor that affects both.
“To date, a financial wellbeing program has only been offered by progressive organizations, but now it is a benchmark for all companies to aim for. Companies that show their commitment to financial wellbeing can boost their teams’ motivation, productivity and retention and become more attractive to new recruits.”
Another form of wellbeing is earned wage access (EWA). This is where employees can get their hands on their earnings before their scheduled payday, in order to ease some financial burdens.
One company leading the way on EWA is HCM giant Ceridian. It launched Dayforce Wallet in 2020 in the US market, and it is now available in a UK pilot. Could earned wage access technology by the solution to the cost of living crisis?
Ceridian’s managing director for EMEA Wendy Muirhead tells UNLEASH: ”In the current state, pay cycles don’t always line up with expenses. This means employees faced with financial emergencies or unexpected expenses between pay periods experience a cash flow crunch and may be forced to turn to high-interest options to get by. This can quickly become unaffordable, causing money problems to spiral out of control.
“On-demand pay is a powerful solution. By enabling staff to access their earned pay in real time, when they want it, instead of waiting until payday once or twice a month, employees are empowered to take control of their financial situation and can improve their financial health and wellbeing at the same time.”
Ultimately, if you want to thrive in the ‘Great Resignation’ (remember, recruitment is expensive), then you need to do something to support your employees in the cost of living crisis. Could EWA be the solution for you?
The International Festival of HR is back! Discover amazing speakers at UNLEASH America on 26-27 April 2023.
Sign up to the UNLEASH Newsletter
Get the Editor’s picks of the week delivered straight to your inbox!