Not for decades have we all been under so much pressure financially: high energy bills, relatively high mortgage rates, food prices on the rise and, to cap it all, a tax burden that is at a 70-year peak. Therefore, it’s not surprising that employees are desperate for more pay. But we shouldn’t forget that employers are having a tough time of it all too. This begs the question: how can employers help staff weather the storm?
Start with pay
Charles Cotton, reward and performance adviser for the Chartered Institute of Personnel and Development (CIPD), thinks a general review of pay and benefits will go some way in giving employees what they need rather than what was useful five years ago. He says that “boosting incomes is perhaps the most obvious way in which employers can support financial well-being and will likely have the most immediate impact”.
Overtime is one answer to this. With money worries at the forefront of many people’s minds, Toyah Marshall, principal employment law advisor and solicitor at WorkNest, points to a survey in HR Magazine and says that “overtime is the most in-demand work perk” (Omoigui, 2022).
‘The current cost-of-living crisis is encouraging employers to explore how their benefits package can be used to help support employees and reduce the risk of workers falling into poverty’
Charles feels that “the current cost-of-living crisis is encouraging employers to explore how their benefits package can be used to help support employees and reduce the risk of workers falling into poverty”. He draws specific attention to those perks that help offset the cost of housing, travel and childcare as being the most useful to those on the lowest incomes.
Six steps for the perfect review
Procedurally, Toyah believes there are six steps needed to conduct a successful review:
- Start by setting clear objectives to work out what you (the employer) want to achieve
- Next, identify your employees’ needs and how they feel about existing benefits
- The third step is to conduct an external analysis – look at what competitors are offering and how they compare
- The fourth step involves delving into the data to see which benefits are being used the most and which deliver maximum value for money
- Step five is communication so employees know what’s available to them post-review
- Lastly comes the need to measure success and return on investment (ROI) to ensure the package remains relevant and affordable – replacing unpopular benefits with new ones
From a legal perspective, it’s important you ensure that any benefits that might be changed aren’t part of an employee’s employment contract. If they are, staff need to agree to the changes in advance.
One-off payments or tax-free vouchers may assist with rising bills and food prices as an alternative to fully fledged pay rises, as would subsidised meals at work or facilitating car-share arrangements.
But there are risks to giving bonuses, not least of which is the chance that they could end up becoming contractually due. This may create issues over how they should be given and to whom, along with how they should be calculated. Here Toyah explains that the key is to make bonuses completely discretionary: “If there is, or there becomes, a history or pattern of making such payments, the element of discretion may be lost.” She adds that employees shouldn’t be given the expectation that they’ll receive a bonus or have any hand in its calculation: “This can be a complex area, so it’s best to seek advice if such payments may be made more regularly, even if only annually, to ensure no obligation to pay is created.”
There are risks to giving bonuses, not least of which is the chance that they could end up becoming contractually due
But for Charles, the advantages of cost-of-living bonuses are manifold:
- They can be given without permanently increasing the wage bill
- They don’t flow through into other aspects of pay, such as overtime rates or pension contributions
- They can be targeted at those hit the hardest by the cost-of-living crisis
- Because they are paid in one go, they can be more useful in paying a large bill than being spread over 12 months like a pay rise
However, he also highlights a key disadvantage: “If such a bonus is paid in one go, it could interfere with state benefits payments of low-waged workers and leave them struggling to budget and make ends meet.”
There is one more option – staff could be allowed to sell back unused holiday entitlement, subject to the minimum 5.6 weeks paid annual leave, which cannot be paid in lieu.
Many employers already offer staff the option of an interest-free loan, often for the purchase of a transport season ticket or to buy a motor vehicle. Some employers have also offered these to those in financial difficulty, with a link to financial information and guidance.
However, as Charles details, such loans are not simple “fire and forget” options – employers need to consider certain details. He reminds us to “consider HMRC regulations around interest-free loans, what happens if an employee leaves before paying off the full loan amount and whether those who have taken out loans for financial reasons be offered financial education and awareness courses”.
Toyah takes this further, observing that employers can loan each employee up to £10,000 a year with no tax consequences. “Essentially,” she says, “the employer pays the employee a set amount on a one-on-one basis with the agreement that they pay it back over a defined period.” Administratively, she recommends that “employees sign a loan agreement setting out the terms of the repayment, including repayment term, authorisations for deductions from salary for repayments, repayment if they leave and sanctions if the loan isn’t repaid”.
She also asks if hardship loans are a good idea because “loaning money to employees won’t necessarily solve the problem and could lead an employee into further debt”. Further, she says that employers rarely do a “credit check” when lending money: “What if the employee has no means of paying it back? Disciplinary action? Employers are not banks.”
What if employers are not in a position to pay more?
It’s no secret that many employers are also facing a hike in their own costs, so their ability to help staff cope financially may be limited. However, Charles thinks they can still explore the steps they can take to help their employees. This could include cutting commuting costs by offering homeworking, flexible hours, season tickets or transport to work, or helping staff with food through free or subsidised canteen meals and drinks, shopping discounts, luncheon vouchers or workplace cooking facilities.
[You can] still explore the steps they can take to help their employees. This could include cutting commuting costs by offering homeworking, flexible hours, season tickets or transport to work, or helping staff with food
Employers can also help with childcare by offering paid leave for caring responsibilities, subsidised childcare, emergency childcare support, maternity loans or guidance for staff to access the government’s tax-free childcare schemes. Salary sacrifice schemes can also be added to this list as they can be used to efficiently assist with things such as childcare vouchers or cycle-to-work programmes while sharing the burden between employee and employer.
There’s also the potential for a shorter working week where employees are paid for five days but work longer hours for four days. It is an option that some employers have implemented that could assist in accommodating second jobs; for employers, this could save on office costs.
Another idea – which Toyah suggests – is the provision of free meals at work as part of an employee benefits package. She adds that one BT call centre set up a “community pantry” where staff donate and pick up essentials such as dried pasta, cereal and baby food (Breese, 2022). However, she says: “While some will appreciate these sorts of perks, it’s important to be mindful that many will be uncomfortable with the idea. Moreover, those who are facing financial hardship will likely not want their colleagues to know that they are struggling and may feel embarrassed to use such initiatives.” In her view, the best and simplest way to avoid well-intentioned initiatives backfiring is to ask employees and set up a “financial support group” made up of employees’ representatives.
Watch for discrimination
Lastly, there’s the matter of discrimination: a hot topic for some, and employers must be careful. In particular, they must understand that employees with certain protected characteristics may be more affected by the cost-of-living crisis than others. Younger people tend to be on lower wages than older employees, and women are still more likely to be paid less than men. In addition, many people with disabilities are being significantly impacted and may need additional assistance. And there’s also the matter of religious observance.
There is no “one-size-fits-all” solution to the cost-of-living crisis. Of course employers want to be benevolent and help staff – but in doing so, they need to exercise careful thought and common sense and ensure they do not bind themselves to unsustainable practices or open their veterinary practice up to legal claims.