More than 60% of UK business leaders think they have a substantial responsibility to help employees with the rising cost of living, but only 30% are prepared to award above-inflation pay rises this year.
A survey of more than 1,000 employers commissioned by the Work Foundation and the Pentland Centre for Sustainability in Business, both at Lancaster University, found that 36% are finding it harder to implement pay rises above inflation since it started rising rapidly post-Covid.
At the time the survey was carried out in March 2024, CPI inflation was 4%.
The Work Foundation’s report, Shifting Priorities? Employer responsibility in the year of the cost of living crisis, also suggests that only 38% had introduced new financial wellbeing measures since the start of 2023, such as pay rises, one-off cost of living payments or increasing the ability to work overtime. Thirty-four per cent said they were unable to offer any support at all.
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As costs increase, 18% of organisations said they had considered redundancies. Thirty-five per cent were experiencing increased business costs.
Work Foundation director Ben Harrison said: “Inflation may be coming down but it’s wrong to think the cost-of-living crisis is over – the truth is it has evolved.
“Interest rates are at a 16-year high, inflation is still above target and there are groups of people who have been suffering more than most with the acute effects of financial hardship. A third of businesses were unable to any support their staff in 2023, and that will hit the lowest paid workers most.
“In a world where wages are worth less, it is vital that employers continue to support workers with long-term financial wellbeing support and focus on providing pay rises which match or exceed inflation wherever possible.”
Employers were also continuing to struggle with recruitment. Forty-seven per cent of large organisations and 35% of SMEs said they struggled to hire, while retention challenges were faced by 38% and 16% respectively.
The report recommends that:
- the UK government extends the Household Support Fund to at least April 2026 when the OBR forecasts real household disposable income per person to recover to its pre-pandemic peak
- senior leaders prioritise awarding at or above inflation pay increases, especially for lower earners, and review employment contracts to prioritise job security
- senior leaders take an engagement-first approach and work with employees and trade unions to build a financial wellbeing strategy to deliver long-term inflation-proof wages.
Professor Jan Bebbington, director of the Pentland Centre for Sustainability in Business at Lancaster University, said: “These findings raise concerns in the context of the Sustainable Development Goals – which should be acting as a north star for businesses.
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“The goals highlight the importance of poverty reduction, improving health and wellbeing and increasing access to an income that can support people’s needs. Responsible businesses are – and more should be – proactively seeking opportunities to support the financial wellbeing of their workforce now and into the future.”
