Everyone is feeling the pinch. Inflation is outstripping benefits and wages, and coupled with recent tax hikes, real disposable income has reached its lowest point in decades. The Bank of England predicts the current cost-of-living crisis to last until next year, with the potential to continue into 2024. This is not a situation people can just wait out, action must be taken quickly.
But as employees are tightening their belts across the country, so too are employers. The drop in disposable income is hitting company revenue, and many businesses are unable to raise wages. However, there are other ways that organisations can help their employees to reduce the impact of the increases in cost of living. Research by Blackhawk Network Extras, published in June 2022, found that employee benefits have a crucial role to play during the current crisis, and can be better utilised to support employees.
Why employers need to care about the cost-of-living crisis
The research findings of 2,000 employees and 500 HR leaders in enterprise and small and medium-sized enterprise (SME) businesses are clear: both sides agree employers should feel responsible for supporting their employees through the crisis. However, opinions on whether that support is being provided are not quite as synchronous. Only 5% of employees believe their employers are definitely giving them enough support, and even employers feel they could be doing more. Just 32% of enterprise employers and 25% of SME employers believe they are definitely doing enough to support their employees.
Almost two-thirds of employees (63%) say they would be likely to leave their jobs for more lucrative opportunities due to the cost-of-living crisis, and workplace benefits are increasingly factored into this valuation. When the current crisis is considered alongside the Great Resignation, this is a particularly perilous time for employers. They need to make sure their employees feel supported during the cost-of-living crisis or risk losing talent.
Employees want support, but lack understanding
Workplace benefits are often created to have varying impacts. For example, hybrid and remote working have cultural and financial benefits like saving money on travel and offering flexibility, while other benefits are designed with the intention of saving employees money. Salary sacrifice arrangements, where employees can pay for services or products from their salary before they receive it to reduce tax, put real money back in employees’ pockets. A great example is the Cyclescheme, which saves employees up to 40% on bicycles and accessories, encouraging them to cycle to work. Another is the Techscheme that allows employees to save money and spread the costs of thousands of consumer electronic and white goods products.
Employees are already actively making changes to make their money stretch further. Since the cost-of-living crisis began, 24% of employees report they have been using their workplace benefits more. This is a strong indication of the desire among employees to receive benefits, but employers can still do more to help employees recognise their benefits’ full potential. The research finds a lack of understanding is holding many employees back from taking full advantage of the workplace benefits on offer. Almost three-quarters of employees surveyed (73%) do not fully understand what salary sacrifice means, including 18% who have no idea at all. In contrast, both enterprise and small- and medium-sized enterprise (SME) employers grossly over-estimate the level of understanding most of their employees have surrounding salary sacrifice.
Breaking barriers to make pay go further
The biggest perceived barrier to take up of workplace benefits for both employers and employees is a lack of relevance. Employers should ensure they are listening to what their staff want from their workplace benefits, as well as communicating more effectively about the benefits already offered.
Chris Ronald is vice president, Europe, Middle East and Asia (Emea), B2B – incentives, rewards and benefits (regional head), at Blackhawk Network