The soaring cost of living in the UK - affecting everything from people’s weekly shop to energy prices to rents - has reached a crisis point. Many people are already facing severe pressure on their finances, resulting in increased stress and anxiety. The crisis is widely expected to grow worse over winter, with many comparing its impact to that of the first years of the Covid-19 pandemic.
Employers should be aware of the impact of the rising cost of living on their employees’ well-being and mental health and begin putting measures in place to understand both how it is affecting people’s individual circumstances and what they can do to support them during this difficult period.
Measures employers could implement to help their employees during the cost of living crisis could include paying a living wage, introducing improved benefits such as flexible working and childcare subsidies, providing free financial education, and sign-posting government support and other resources available to help.
The cost of living crisis and its growing impact on individuals
The UK is facing an unprecedented cost of living crisis, with inflation at its highest level in more than three decades and exacerbated by the soaring cost of energy. The cost of living crisis has been driven by a perfect storm of market forces including the ongoing impacts of the pandemic, Brexit, and the invasion of Ukraine.
Inflation, which has been as high as 10% over the past year, has now vastly outstripped wage and benefit increases for many people, and has been further exacerbated by recent increases to National Insurance and council tax, says the Institute for Government.
At the same time, the UK household will now pay up to an average £2,500 a year on their energy bill for the next two years - with the government having now implemented an ”Energy Price Guarantee” from 1 October 2022 to protect people in Great Britain against further increases. According to the Financial Times, traders are expecting the extremely high gas prices behind increased energy costs to persist through 2023 and possibly into 2024.
The cost of living crisis is already impacting every aspect of people’s daily lives. Around 9 in 10 (89%) adults or 46 million people in Great Britain are reporting that their cost of living has increased, according to the ONS. Food prices were 12.8% higher in August 2022 than they were a year earlier, reports the Economist. Rent has increased by almost the same amount, up 12% year-on-year in England, taking the average cost of rent in the UK to £1,227 a month, according to Goodlord.
Already, nearly 11 million people are behind on their bills while more than 5 million have gone without food, according to research by the Money Advice Trust, with more than a third (34%) of UK adults saying that they have already cut down on all non-essential spending to deal with the rising cost of living.
The research also found that just 20% of UK adults feel prepared to deal with rising costs and more than 1 in 5 UK adults (22%) say they worry about money every day. The Money Advice Trust also found that certain groups are more vulnerable to the crisis than others, including people aged 18-34 and people from an ethnic minority background, who were more likely to say they expected to need debt advice, or to have to use credit for essentials.
The ONS found that renters might be particularly vulnerable to the crisis, with those whose cost of living had gone up being more likely to have reduced their spending on food and essentials (46%) than those who own their homes outright (27%) or are paying off a mortgage (33%).
These increasing financial worries and pressures are likely to have significant repercussions on overall mental health and wellbeing, with money and mental health being “intricately connected” according to the Mental Health Foundation, which says that debt in particular can trigger or worsen conditions such as anxiety, depression and stress, while mental health problems can make earning and managing money harder.
Employers should take time to understand employees’ individual circumstances and how the cost of living crisis could affect them differently so that they can support them
Support your employees’ wellbeing by providing them a ‘safe space’ to talk
Your people are going to have very real concerns and worries about the cost of living crisis. This is an example of an event that is outside our control, but it is within our control as businesses and leaders to listen and make our people feel heard.
Our working and personal lives have become far more intertwined after Covid-19, and it’s become more normalised that the expectation that companies provide a level of wellbeing service. So it is our responsibility to give our people an outlet to talk about not just work challenges, but personal ones too.
Here’s a real example of a Rungway post, where an employee feels safe enough by remaining anonymous to start a discussion about their experience during Covid-19:
Offering an ‘always-on’ platform like Rungway, which allows the user to opt for anonymity, is how organisations get organic, unprompted feedback. This person felt the desire to share their anxieties about the cost of living with their peers, and feel connected with others feeling the same. In this example, leadership and peers responded with kind and detailed messages proving the impact of community - whilst humanising leadership at the same time.
Employees who feel connected to their peers, leadership and organisation are 90% less likely to burn out (O.C Tanner)
Ensure your ‘quieter voices’ are also being heard
According to Rungway, women are twice as likely to refrain from offering feedback due to fear of being a nuisance, and colleagues of colour are 44% more likely to receive a reply on a question posted to the platform if they opt for anonymity, rather than using their own name.
To manage employee wellbeing, make your culture more inclusive and a create a sense of belonging for everyone is crucial. In what ways are you ensuring that you’re hearing from not just the ‘louder’ voices, but those who are less visible within your organisation - namely Gen Z, women, ethnic minorities, introverts and neurodiverse people to name a few?
What’s more, are you allowing them to give feedback freely, not just with prompted questions?
Again, here’s an example based on a real Rungway post which shows the types of perspectives you could be missing without the right tools:
When you’ve got insights like this, you have the opportunity to make much more meaningful and impactful changes - you can make the right decisions faster.
Providing meaningful employee benefits
It’s not always possible for every organisation to increase pay. There are other benefits that organisations could offer their people that also have a positive impact on employees’ finances and wellbeing during the cost of living crisis.
Before implementing new benefits, employers should make an effort to understand which benefits will provide the most help to their employees with respect to their individual circumstances.
“By understanding the nuances of sentiment amongst different groups of employees - be it Gen Z women, or colleagues of colour - it’s crucial to tailor your policies to the specific needs of those people.” Julie Chakraverty, Rungway Founder
Once these benefits are in place, it’s also important that organisations ensure their employees are aware of the benefits that are available to them by ensuring they’re communicating through a variety of channels.
Some of benefits could include:
Helping with food costs: There are several ways that employers could help their employees with rising food costs during the cost-of-living crisis. Employee discount schemes, such as Perkbox, offer discounts on food. Other businesses, such as Bespoke HR are helping more directly, by giving their staff supermarket vouchers. If your employees are required to be on site, free breakfasts and lunches - an initiative recently introduced by John Lewis to support employees over winter - can also go a long way towards reducing food costs.
Offering on-site or subsidised childcare: Childcare is a huge cost for working parents, with childcare benefits in greater demand than other employer offerings, including gym memberships, free company events, and even enhanced parental leave pay, according to research by recruitment platform Beamery. Currently, 53% of employers offer childcare vouchers, found CIPD, but just 5% of offer subsidised childcare through on-site crèches, and less than a quarter offer paid time off for emergency childcare (23%).
Reducing commuting costs through remote working: Allowing employees to work from home can have a real impact on their finances. But, post-pandemic, many businesses are now mandating their staff return to the office at least once a week. Businesses could consider whether it’s really necessary for employees to come into the office to work effectively and, if not, getting rid of this mandate. “Allowing employees to work from home eliminates the cost of commuting, and mitigates other costs like purchasing professional work clothes or eating out every day,” says Michael Alexis, CEO of TeamBuilding.
Financial literacy programmes: Only 41% of organisations offer free financial education, guidance, or advice to their employees, according to CIPD, despite 65% of employees saying it’s important that their future employer has a financial wellbeing policy, rising to 81% of those whose current employer has one in place. Services such as Octopus Money Coach partner with organisations to provide their staff with remote financial coaching and tailored budgets and financial plans.
Mental health support: Financial concerns can take a real toll on your employees’ mental wellbeing. At the same time, getting support for mental health is often expensive and inaccessible for many - and, even for those who can afford it, is likely to be one of the first things to go when they need to cut back on costs. But, like remote financial coaching, there are now organisations such as Sanctus that partner with employers to offer their employees remote coaching that provides proactive mental wellbeing support and self-care.
Signpost financial support and other resources
There is plenty of free support available for people outside of the workplace, too - but employers shouldn’t assume that their teams are aware of the help that’s available to them.
Organisations should signpost financial support available from the government to their employees through a variety of communication channels, as well as other free resources that can help them manage both their finances and their well-being during this period.
The Government has introduced numerous schemes to support the most vulnerable people financially during the cost of living crisis. In particular, employers should make sure to highlight the Help for Households website, which outlines all of the support from the government that’s currently available.
This includes the ‘Energy Price Guarantee’ will mean a typical UK household will pay no more than £2,500 a year on their energy bill for the next two years, which is automatic and applies to all households, and the £400 discount on energy bills will also be made to all households in Great Britain from October. This automatic, non-repayable discount will be applied in six instalments between October 2022 and March 2023 to help households through winter. There is no need to apply for the scheme and you will not be asked for your bank details.
MoneyHelper and Citizens Advice
Both MoneyHelper and Citizens Advice are free impartial services that offer a range of tools and advice to help people who are struggling with rising costs, including budget planning tools to help them get an understanding of their current financial situation and manage their bills going forward. Both offer individual advice online, on the phone, or in person, including debt advice.
The cost of living crisis is likely to have a serious impact on some people’s mental health. Mind offers free resources and support to help anyone who is experiencing a mental health problem, including an Infoline where people can ask about mental health problems, where to get help, treatment options, and advocacy services.