The cost of living in the UK has been increasing since 2021 and inflation reached its highest recorded level since 1992 in February this year.
The rate of inflation is predicted to keep rising and reach a peak in the final few months of 2022.
This is causing huge financial worries for people and, whilst inflation rises, pay increases aren’t going up at the same pace, according to figures from the ONS.
For businesses and employers who are also battling rising costs and factors such as spiralling energy costs – with no cap in place for businesses – increasing pay for employees is a challenge.
It’s important that businesses know how to handle pay reviews, pay rise requests and ensure competitive wages for staff retention. There are also support systems and workplace benefits that businesses can put in place for employees.
Hannah Copeland, HR Business Partner at employment law and HR support firm WorkNest, said:
“Whilst competitive wages are undoubtedly up there when it comes to engaging and retaining good people, it may not always be practicable for employers to keep up with inflation.
“However, employers and HR departments have a key role to play in helping employees and there are other things businesses can do to try and ensure money is less of an issue.
“Employee Assistance Programmes (EAPs) are a key investment for many businesses. These are somewhere that employees can go to get support in a huge variety of areas such as mortgage advice, financial planning, debt management alongside many other unrelated issues. Many EAPs will also supply counselling for employees which tackle the emotional challenges of managing finances. EAPs are commonly supplied by a third-party supplier but businesses will be instrumental in setting the scheme up and making sure it offers services which are valuable to employees.
“Employers must be also open and transparent when it comes to pay reviews. Even if the review doesn’t lead to a pay rise, then it is vital that this is communicated and some thought has gone in to looking at salaries and considering whether a pay rise could be applied. Yearly pay reviews are recommended unless your business operates performance related pay, in which case, individual objectives can be linked directly to business performance. In this situation, employees become more able to control their income based on what they deliver. Companies must not fall into a trap of offering pay rises based on individual needs. There should be clear structure surrounding pay and promotion.
“Employers may feel more able to consider whether they can support individuals financially on the basis of their broader benefits offering. Flexibility here is key and HR expertise is capable of helping companies to understand whether there is scope in the business to offer things like interest free loans for buying season tickets for travel or creating tax savings through salary sacrifice schemes.
“There may also be schemes that already exist within the business which employees don’t know about such as shopping discount schemes. HR has an important role here in communicating what is available and encouraging maximum uptake.”
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