It is safe to say that the UK economy has not witnessed such financial stress in decades. There is real pain being felt across the country as a result of rising energy rates, relatively high mortgage rates, rising food costs, and a tax burden unseen since World War II.
It is therefore understandable that workers are desperate for more money, especially in the healthcare sector where many have gone on strike because they cannot cope with what they are currently earning.
Pay is an issue
From an employer's perspective, Charles Cotton, the Chartered Institute for Personnel and Development (CIPD) reward and performance adviser, believes that a general review of compensation and benefits may help employees get what they need. This is different from what was useful a few years ago. In his view, ‘raising incomes is perhaps the most obvious way that employers can support financial wellbeing and will likely have the most immediate impact’.
Another option is to allow (more) overtime. Toyah Marshall, principal employment law advisor and solicitor at WorkNest, cites a survey published in HR Magazine and states that ‘overtime is the most in-demand work perk, followed by flexible working hours and company-funded retirement plans’.
Cotton thinks 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 reckons that elements of a package can be rebalanced to help with the costs of housing, travel, and childcare—all of which will be especially welcomed by those on low incomes.
It is his view that any review should be based on existing HR data, particularly where it considers staff absences, discipline, calls for help, efficiency levels, and information gleaned from conversations with workers.
Marshall concurs and believes that a successful review should be based on six procedural steps. She would start by setting clear objectives to work out what the firm wants to achieve. Next, she would identify employees' needs—how they feel about existing benefits. Her third step is to conduct an external analysis and look at what competitors offering and how they compare.
The fourth step entails delving into the data to see which benefits are being utilised the most and which deliver maximum value for money.
Fifth comes communication so that, post review, employees know what's available to them. Lastly comes the need to measure success and return on investment to ensure the package remains relevant and affordable, therefore replacing unpopular benefits with new ones.
Marshall warns, however, that ‘from a legal perspective, it's important to make sure that any benefits that might be changed aren't part of an employee's contract of employment’. If they are, it will be necessary to consult with staff to obtain their prior consent to make these changes.
Paying bonuses
The news is full of reports of governmental activity around the UK that has sought to help public workers with the cost of living – and to stall any strike action.
But for the private sector, one-off payments or tax-free vouchers are an option to consider as they may assist with rising bills and food prices and are an alternative to fully fledged pay rises, as are subsidised meals at work or facilitating car-share arrangements. In fact, the CIPD's Summer Labour Market Outlook for 2022 found that 15% of organisations had paid, or were planning to pay, such a payment to some or all their workers, while a further 15% had the matter under review. 18% of private sector firms were most likely to have paid this bonus.
But there are dangers to giving bonuses, not least of which is that they could become contractually due. Here, Marshall says, ‘if there is, or there becomes, a history or pattern of making such payments, the element of discretion may be lost’.
» The Healthcare Workers' Foundation (HWF) is now providing financial assistance of up to £1,000 to struggling healthcare workers and their families «
» One more option is for employees to be allowed to sell back any unused holiday allowance, provided they take at least 5.6 weeks of paid annual leave, which is the legal minimum «
She adds that workers shouldn't be given the expectation that they will receive a bonus or have any say in how it is calculated: ‘this can be a complex area, so it's best to seek advice such payments may be made more regularly, even if only annually, to ensure no obligation to pay is created’.
Be that as it may, for Cotton, the upside of giving bonuses is that they can be one-offs and won't permanently expand the wage bill; they don't feed into in other facets of pay, such as overtime rates or contributions to pensions; they can be given to those hardest hit by rising costs; and they can be helpful for those paying large bills precisely because the bonus is made via a single payment.
However, he cautions that employees might expect their employer to make another award if inflation does not fall anytime soon. Additionally, ‘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’.
One more option is for employees to be allowed to sell back any unused holiday allowance, provided they take at least 5.6 weeks of paid annual leave, which is the legal minimum.
Loans for employees
Some employers already provide employees with interest-free loans, typically for the purchase of a vehicle or a travel season ticket. However, as Cotton explains, these loans are not straightforward ‘fire and forget’ options, and it is necessary to ‘consider HMRC regulations around interest-free loans, what happens if an employee leaves the organisation 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’.
Marshall takes this further and says that employers can loan employees up to £10,000 each year with no tax consequences —‘essentially, the company pays the employee a set amount on a one-on-one basis with the agreement that they pay it back over a defined period’.
She suggests, on an administrative level, 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 the company, and sanctions if the loan isn't repaid’.
Employers thinking about offering such loans need to explain them to employees. ‘Some people might be put off from claiming them because of the stigma attached’, Cotton explains. He further adds that ‘this can cause problems later as these people might get into further financial difficulty, and it becomes more difficult for the employer to help’.
Marshall doesn't disagree and questions whether 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’.
» But for the private sector, one-off payments or tax-free vouchers are an option to consider as they may assist with rising bills and food prices and are an alternative to fully fledged pay rises «
In addition, she asserts that when lending money, businesses rarely conduct a credit check - ‘what if the employee has no means of paying it back? Disciplinary action? Employers are not banks’.
Employers unable to pay more
Like employees, many businesses are also experiencing an increase in their own costs. As a result, it may be difficult for them to help employees financially. However, Cotton thinks that they can still explore steps they can take to help their employees.
This could include allowing homeworking and offering help with season tickets; assisting employees with free or discounted meals and drinks from the canteen; offering shopping discounts, lunch vouchers, or workplace cooking facilities; or assisting with housing through rental deposit schemes, housing and rent subsidies, or guidance on housing-related legal rights.
Employers can also assist with childcare by providing flexible working hours, paid time off for caring for a child, subsidised childcare, emergency support for childcare, maternity loans, and direction for employees on how to use the government's tax-free childcare programs.
There is also the potential for a shorter working week where employees are paid for five days but work longer hours on four days. It is an option that some employers have implemented that could assist in accommodating second jobs; for employers this could save on premises costs.
Marshall also suggests other ideas including free lunches at work as part of an employee benefits package. She notes that one BT centre set up a ‘community panty’ where staff could donate and pick up essentials such as dried pasta, cereal, and baby food. However, she says that ‘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 utilise such initiatives in an open office’.
Ultimately, she believes that talking to employees via a ‘financial support group’ should prevent well-intentioned initiatives from failing.
Discrimination risks
Last but not least, there is the issue of discrimination.
Employers need to be careful as some employees with protected characteristics may be affected more by the cost-of-living crisis than others. Women are still more likely to be paid less than men, and younger workers typically earn less than older workers. In addition, those with disabilities tend to need more help.
Marshall worries that providing assistance only to employees who have not been absent from work could be interpreted as discriminatory by those who have been absent due to disability, childcare issues, or maternity leave.
And then there's the matter of a free canteen. Here Cotton asks, ‘how do you support employees who work from home or on shifts when the canteen is closed? Marshall adds another mantrap—that not all employees may be able to benefit unless the programme caters for those on, say, Kosher or Halal diets.
Summary
In conclusion, there is no one-size-fits-all answer to the crisis caused by rising living costs. Naturally, employers will want to help employees, but they must exercise thought and common sense and ensure that they do not bind themselves or expose the company to legal claims.
Panel: Healthcare Worker's Foundation
The Healthcare Workers' Foundation (HWF) is now providing financial assistance of up to £1,000 to struggling healthcare workers and their families.
The project, backed by comedian, author and former doctor Adam Kay, has two funds. A ‘general fund’ that is a grant of up to £1,000 for a particular item/cost or service that applicants are unable to pay for. And a ‘rainy day fund,’ which is a grant of up to £250 that can be spent in any way that helps with outgoing costs.
Anyone working in a healthcare setting, regardless of whether employed by the NHS directly, such as doctors, nurses, dentists, healthcare assistants, professional carers, porters and administrative staff can apply for the charity's support.