With the soaring cost of living, many employees won’t have ever felt their finances so squeezed as they are right now. The Chancellor’s Spring Statement attempted to address some of the issues that the general public are facing, but workers are still left feeling helpless against the rising cost of living. People are facing an increase in their energy bills, public transport, petrol, food, and more. In fact, the Office for National Statistics found that inflation in the UK reached 6.2% in February, seeing the biggest drop in spending power since 1956 when records began. It’s even predicted to surpass 7% in April.
The Bank of England maintains that this rise in inflation is a side effect of the pandemic, and only time will tell when costs will stabilise. Until then, workers are going to feel the squeeze. During economic uncertainty, it’s common to feel anxious about finances. A recent study found that 16% of the public are already losing sleep over cost of living concerns, and 19% have cut back on activities that help their mental health, like the gym. Lack of sleep and not being financially able to do the things that help us can cause distraction or disengagement, consequently resulting in an impact on work.
Helping to support employees, empower them financially, and address the mental health issues that stem from inflation is imperative for HR employees. Not only in a pastoral capacity, which requires HR to ensure that all employees are properly supported, but also as a business practicality. Anxious, distracted, and stressed workers will not be as productive. Therefore, it’s increasingly important for both employees and employers that workers have adequate support available.
Offer practical education and support
Being open about finances in the workplace is beneficial on multiple levels. It tends to feel unnatural because so many employees just aren’t used to talking about money openly, but it can be very valuable. It’s not very often that people receive practical, useful information on personal finance, and this can lead to making rash decisions in emergencies rather than developing long term plans. Providing financial education can equip employees with skills that they’ll have for the rest of their lives. Also, having this knowledge and control over finances is incredibly empowering and can make a huge difference to financial wellbeing and stability.
Advising pension options
If someone is struggling financially, there’s a good chance they can’t put anything away to save. This makes their pension contributions even more valuable. However, workers, particularly younger employees who see their pension as a distant reward, might be tempted to stop contributing to their workplace pension. During times of financial difficulty, people look for ways to minimise costs. If an employee is already struggling and they’re seeing X amount going into their pension each month, it’s natural to want that money for the ‘now’ rather than the future.
By pulling out of company pension schemes, workers are reducing how much employee contributions they’re entitled to. It’s essentially ‘free’ money, so giving up this entitlement is not a good financial decision. HR teams and managers should ensure that employees are aware of the long term financial risks if they pull out, and the rewards if they don’t.
Companies could start by making employee pension schemes more accessible so workers can actually see how much is in their pot, and how much they could have when they retire. This is a really good incentive to keep going. Also, guidance and support should be on hand for employees to get to know more about their pension and the benefits of contributing. A regular guidance meeting is a simple way of reminding employees of the support that’s on offer.
Openly address the mental health impact
Mental health and money are intrinsically connected. Currently, for many families, there is quite a real difference between being warm and being fed. Dannielle Haig, Director and Business Psychologist at DH Consulting said: “It’s understandable for people to develop financial anxiety and concerns over financial security during economic turbulence. When we feel this way, it can overwhelm us psychologically and that has an obvious impact on other areas of our lives including work, where we become disengaged, demotivated and generally exhausted from lack of sleep and cognitive and emotional fatigue.
HR teams should speak to employees directly and openly about these mental health issues. The days of taboo surrounding mental health are gone, or at least they should be. Otherwise, companies risk an unhappy workforce and retention could take a hit. It’ll also affect general performance and productivity, perhaps resulting in the overall performance of the company declining. Financial wellbeing platform Mintago recently revealed that 36% of millennials find their work performance is impacted by money worries.
Of course, there’s the obvious solution: a pay rise. Several businesses have stepped up to help staff by increasing their pay. One boss who gave their staff a permanent pay rise says, “I want people to leave their stresses at the door. But you can’t do that when you have a massive bill to pay, you’re not going to perform.” While it’s an immense and helpful gesture for so many workers, employers aren’t obligated to increase pay. It’s a slippery slope, as payroll is already the biggest cost to most businesses. And most employers that are still trying to get back on track post-pandemic, this just isn’t possible.
Instead, consider offering employee benefits such as private healthcare, insurance, gym memberships, childcare vouchers, and discount codes. These can help improve employee satisfaction and lift the financial burden. Again, this isn’t possible for all employers. But what is possible is providing financial education, mental health support, and empowering employees to take control of their own financial wellbeing. Sometimes, just communicating that HR’s door is open to talk about concerns can go a long way.
This blog was written by Phase 3, they are an exhibitor on the HRTech247 Consulting & Advisory Partner floor of the Partners Hall. You can visit their virtual space here.