Need to know:
- The cost-of-living crisis is forcing more employees to take on additional work due to financial pressures, raising concerns around burnout.
- Pay strategies such as targeted pay increases, performance-related bonuses and earned wage access can help.
- Employers need to ensure there is a culture where people can discuss financial concerns.
With the cost-of-living crisis enduring, employees from some sectors are likely to be seeking additional hours, usually through taking on overtime. Yet there are concerns this could have a negative impact on their mental health, adding to the stress they are already under. The challenge for employers is to ensure staff can cope financially without jeopardising either their health or feeling they need to move roles altogether.
It is important that employers look at base pay as a starting point, says Gemma Bullivant, a freelance HR director and executive coach. “Segmentation of pay awards is a powerful way of ensuring the limited pay increase budget can be distributed in the most appropriate way,” she says.
“This may involve awarding higher percentage increases to lower-paid workers, where productivity is highest, which ultimately funds the pay bill, and stronger governance where pay should not be awarded for other reasons such as poor performance or paying over market rates.” Accurate pay benchmarking is essential here, she adds.
Dr Duncan Brown, an independent reward adviser and principal associate at the Institute for Employment Studies, believe the concept of overtime is less relevant in an age where many, in sectors such as retail or hospitality, now work on zero-hours contracts. Instead, he has developed pay models which he believes work better for both employers and employees. “We gave employees in stores and plants an incentive to finish their work on time, whereas premium overtime rates provided an incentive for them to work as long as possible,” he says.
Pay for performance
Widening the pool of employees who can access performance-based pay opportunities can also help, says Jon Rudoe, co-founder at employee money-saving platform Nous. “It’s an effective way of enabling more employees to up their earnings, and can encourage improved performance across the [organisation] too,” he says.
Other employers are providing financial support in different ways. Andy Whiteaker, head of employment at law firm Boyes Turner, says: “We have seen some organisations offering early pay rises or cost-of-living bonuses. Recognition programmes are something we’re seeing more of: employee of the week or month being rewarded with vouchers, for example.”
Some employees are also taking second jobs, which can create issues from a mental health perspective.
James Malia, European president and global chief growth officer at Prezzee, highlights a project where an employer client provided tailored support to those most in need. “We launched a winter support package to give our client’s employees £750 on e-gift cards over a four-month period,” he says. “It was offered to all employees under a certain salary bracket with the option to decline, and those in the higher brackets could also apply for the support if required. It was restricted to support with food, energy and living essentials.”
Flexible pay or earned wage access can also help, by providing employees with access to money they have already earned without having to wait until pay day. David Roberts, fintech lead at Zellis, says: “It can provide a critical safety net in times of financial stress. It’s most effective when coupled with financial education and signposting to sources of support and advice.”
Working hour limits
Aside from pay, there are other measures employers can adopt to ensure employees are not working too much. “Employers may need to establish weekly limits, enforced breaks and proactive holiday management practices to counterbalance the effects of longer working hours,” says Bullivant. “This needs to be considered pragmatically and with wider support for employees who genuinely feel they have no alternative options.”
There is also the need for a culture where people can talk freely about any issues or financial pressures they are experiencing, says Whiteaker. “Trends like the ‘loud budgeting’ movement, which is reclaiming frugality, are shifting the financial wellness conversation in the workplace,” he says. “As employers, we can shift the culture of how we talk about money at work, being more open so people know they’re not alone.”
Organisations that can help employees navigate the current economic climate stand to benefit in the long run, adds Bullivant. “Investing in employee support measures fosters loyalty and trust, leading to stronger employee engagement and, ultimately, improved organisational performance,” she says. “Prioritising employee welfare is not only the right thing to do ethically but also a strategic imperative for long-term business success."
