The cost-of-living crisis presents a unique challenge for businesses who simply cannot afford to ignore the impact rising costs may have on their people. Financial worries can compound levels of stress, which, in turn, can impact the physical and mental well-being of employees.
How will payroll need to evolve to meet the challenges presented by the cost of-living crisis? What responsibilities do employers have to safeguard their people and what role does software have to play?
According to research by Wagestream, 75% of the UK workforce have less than £200 in savings. That means a large majority of employees in Britain are living on a knife-edge financially, with any unexpected outgoings having the potential to cause serious harm.
Now with Inflation at a high we haven’t seen for decades and with wages in many sectors not rising to meet price hikes, it’s no secret that the cost-of-living crisis is set to have serious consequences for the long term financial well-being of many.
People are already making very real sacrifices to account for increasing daily costs and there’s genuine cause for concern that cutting back in areas such as food or utilities can actively impact their physical well-being.
There’s also an already closely established link between money and mental health, something which is predicted to become especially pronounced as the cost-of-living crisis hits home. You can read more about this here: http://ow.ly/60ro50KRntG.
With more and more people set to struggle to keep their heads above water, businesses cannot afford to be blind to the impact financial struggles can have in leading to spiralling instances of anxiety and depression.
What is the role of payroll in safeguarding financial well-being?
Payroll professionals have a huge role to play in driving forward greater financial awareness and education among employees. It’s a real cause for concern that there’s little practical, financial advice given to people during their time at school.
This means people end up joining the workforce with very little understanding of how to best manage their finances. Payroll teams should act as standard bearers of financial good practice, removing the stigma around talking about money worries and helping their people understand how to make their wages go further.
Doing away with the concept of financial well-being talk as a taboo offers a greater scope for organisations to act as influential guiding forces, offering educational tools and programmes to support their employees and encourage smarter spending.
Employees who are struggling with rising costs and mounting debts should also be encouraged to seek out help from external agencies such as the government’s Money and Pension Service.
It’s important to remember these pathways to help aren’t necessarily obvious to everyone, meaning that the most in need can often miss out on vital assistance. Workplaces have a vital role to play in raising awareness of these services and helping their people take the first steps towards getting the help they need.
With the cost-of-living crisis now a very real threat for so many, the need to have a benefits and reward scheme which works for your people is also more important than ever. Many businesses won’t have the scope to reward their people in the more traditional ways, such as through salary increases, so how can they ensure their reward schemes remain relevant and sympathetic to the needs of their people?
How can the expertise of your payroll professionals be leveraged to help guide your rewards strategy and ensure it’s aligned with the needs of your people?
Taking stock of the biggest challenges facing your people will offer the best foundation for restructuring your rewards programmes. Utilities are skyrocketing in price, and it’s likely the hikes in energy bills represent one of the biggest outlays for your people. This suggests support will be most needed in helping soften the blow in this area.
Businesses have already begun to take steps to support their people, with many actively paying the energy bills on behalf of their employees or offering a substantial stipend to alleviate rising costs.
What role does technology have to play?
The cost-of-living crisis is likely to demand in increasing sense of agility from organisations in being able to pivot to meet the challenges of rising costs threatening the well-being of their people. We’ve already discussed how businesses need to change the way they look at their rewards schemes but what about systems and technology their payroll functions rely upon?
Globally, there appears to be a renewed appetite for pay on demand functionality, for wages across all sectors to meet the demands for heightened agility and flexibility.
Pay on demand is a form of employee payment method which allows people to receive wages as they earn them. Rather than being tied to the traditional model of weekly, fortnightly or monthly pay, pay on demand allows employees the ability to have their wages ‘streamed’ to them as and when they work shifts. This avoids long stretches of time between pay periods where money might be tight.
Another element of pay on demand is allowing workers the possibility to have their wages tied into a rigid cycle but to also offer them the flexibility to draw down a portion of their salary early. This could be to help cover emergency expenses or simply to cover a period of unusual spend (such as Christmas time).
Removing the need to be tied to an office location also offers an unprecedented opportunity to help safeguard financial well-being. By having an effective remote setup in place, businesses can do away with the need for a costly daily commute for their people, which, in the context of rising fuel costs in the UK, will go a long way towards softening the blow for many.
It also helps focus the efforts of businesses when it comes to structuring their own rewards schemes. Many organisations offer company cars or other travel stipends which can be deprioritised with the introduction of remote working models.
Businesses should lean on their time and attendance systems to afford them the business continuity they need to make remote working a success within their organisations. By eliminating the need for the daily commute and offering their people the ability to clock in from any location, organisations can help their people keep a weather eye on their finances and craft a working structure which suits them.
At Advanced, we believe that businesses have a hugely influential role to play as standard bearers and champions of good financial practice throughout the cost-of-living crisis and beyond.
We also believe strongly that the technology and software relied upon by organisations daily offers them the perfect framework to drive forward conversation around financial worries.
This article was originally featured in the CIPP “Professional in Payroll, Pensions and Rewards” magazine, published on October 2022