What to do when the cost of living has gone up but your wage bill cannot
The cost of living has increased significantly this year in the UK, leaving households very concerned about how they'll make ends meet. The pressure is on employers to apply pay increases but with many businesses still feeling the pains of covid-19, there might not be the budget available to accommodate this. As an HR within such a business, here is what you can do to support both your staff and your company at this time.
Look at future recruitment plans and cut what you can
Is a significant proportion of the salary allocation for this year and next to go towards the new staff that have to be recruited? Now might be the time to reevaluate the need for these roles and consider automation, internships or outsourcing to cover the workload. The funds can then be reallocated to provide salary increases to the existing workforce.
Cut entertaining bills
Another area where funds could be transferred to support wage increases could be the staff and client entertaining budget.
Often when a business cannot increase wages, it looks at offering benefits such as fun activities and treats to increase loyalty. However, when employees are facing significant financial difficulties at home, treats such as cakes or meals out could cause more damage than good.
Instead, by cutting out weekly team lunches, rounds behind the bar on a Friday or board member expenses, you could save a pretty penny which could fund pay increases. While these may not be large, they would be appreciated.
You certainly cannot refuse to increase wages on the basis of insufficient funds if there's an impression that colleagues or leaders are being excessive with their company card use.
Review benefits and pension contributions
It could also be possible to help your workforce cope with the cost of living crisis by increasing their income indirectly.
One way to do this is to check if the amount you pay for mileage is at the correct level. HMRC’s mileage allowance rate for the 2022/2023 tax year is 45p for the first 10,000 miles for business-purposes and 25p for each business mile after the threshold of 10,000 miles. If you’re offering 25p for every mile, your staff could be eligible for a welcome boost.
There are also changes you can make to your employees’ benefits to turn them back into much needed cash. For example, is it possible to switch off private healthcare or dental cover? Perhaps you can also freeze their pension contributions temporarily.
Be fair and transparent
If, even with some reigning in of entertainment expenditure, your business can still not afford to increase wages, then communicate this to your workforce so that they understand that you have endeavoured to give them greater financial support but cannot at this time. You'll gain their respect for doing so. Provided the pay freezes are applied across the business of course - particularly at board level.
Offer your workforce money saving support
Money troubles can be incredibly overwhelming but you can support your staff to help themselves out of financial difficulty. Why not provide your employees with access to professional support either in the form of an email or intranet article linking to websites such as Money Saving Expert or Citizens Advice, or by setting up an Employee Assistance Programme (EAP)? Such a programme will offer your workforce advice on a variety of areas from mental health to savings and debt.
Offer salary sacrifice loans
To help employees reduce their financial burden, you might want to look into introducing salary sacrifice loans. These are often provided by a third party which works with you the employer to provide a number of financial products and services to your staff to encourage greater long term financial stability. One such scheme from Salary Finance enables customers to take either an advance on their salary or a loan through their employer with repayments funded from future pay checks.
Give your staff performance targets linked to pay increases
If you want to give your workforce pay increases but don't currently have the budget, why not consider giving them performance-linked pay rises? This should increase productivity levels across your workforce and by aligning targets with business goals, a job well done should mean the company has generated the income required to pay out.
Rewards and recognition
Why not boost your employees’ income by introducing a rewards and recognition programme whereby employees can earn money off their everyday spending at the supermarket or coffee shop? Perkbox is one such provider of this service and it also helps employers reward their staff with discounted days off and even holidays.
Change their working hours
It could be the case that there are certain costs that can be easily avoided with some flexibility from you, the employer. Childcare costs can be crippling but by giving staff the ability to work from home more often or compress their hours, you could save them hundreds of pounds every month.
To conclude, even if financial help isn't possible, there is still a great deal you can (and should) offer to show your support to employees at this difficult time. For a quick call to run through the best options for your business, get in touch here.