Figures recently released by the Office for National Statistics revealed that the government’s own Consumer Prices Index measure showed inflation at 3.3% in May – its highest level in 16 years – with rises in energy, food and drink prices contributing to a noticeably higher cost of living.
Chancellor Alistair Darling has warned companies not to award above-inflation pay rises for fear of perpetuating an upward spiral of wages and costs. But benchmarking company Industrial Relations Services found that only one in 18 pay rises in the three months to May was the same or greater than the Retail Prices Index inflation rate of 4.3%.
So HR practitioners should prepare themselves for employees struggling to make ends meet. According to employment experts, this means developing strategies that will help staff cope, and ensure money worries do not impact too much on productivity or morale.
“We are in a difficult economic situation, and that obviously affects people in terms of the cost of fuel, utilities and food,” said Tim Page, senior policy officer at union umbrella body the TUC. “People are really feeling the pinch because these are everyday items.”
Annette Cox, associate director at the Institute for Employment Studies (IES), points out that many people in the workplace today will not have experienced such dire economic conditions as adults before.
She recommends HR departments consider offering employees some basic financial education through a third party, to help them understand the pros and cons of the various mortgage, credit card and savings deals that are on the market today.
“The Financial Services Authority can come into organisations to offer free advice to employees on how to manage their finances, and to direct them to sources of advice if they are having difficulties,” she said.
Cox also said it is important to ensure line managers are aware of signals that suggest an employee is struggling to cope with debt. However, she pointed out that managers should steer clear of offering their own financial advice.
Charles Cotton, reward specialist with the Chartered Institute of Personnel and Development, believes organisations can make practical differences to employees’ financial situations using imaginative work patterns and benefits schemes.
“With the fuel crisis, for example, employers could look at the case for flexible working,” he said. “If commuting costs are going up so much, perhaps people could work from home one day a week or every two weeks to mitigate that cost.
“Another area is through voluntary benefits, where organisations negotiate deals with third parties to supply discounted goods and services, which is another way of stretching an employee’s salary.”
This is just one of many strategies adopted by Sean Wheeler, group director of people development at Malmaison Hotels.
As a direct result of the credit crunch, Malmaison provided its staff with access to Reward Gateway, an online network for employers that gives staff discounts at food, petrol and household goods retailers, along with mobile phone providers.
“It should help your money go further, and you can probably get two weeks’ shopping a year free, which will make a big difference,” said Wheeler. The company also runs an employee assistance programme with a 24-hour helpline that can provide advice on how to cope with debt, among other topics.
In addition, Malmaison offers a number of low-cost schemes designed to reward high achievers and keep morale high, including giving an employee’s entire team a free lunch on a member’s birthday.
But whatever perks employers offer, many staff will feel the squeeze in the coming months, and HR will have a tough task trying to retain morale and productivity.
“People might have to take a second job, which might mean that they’re extremely tired in their day job,” said Cox.
“They might need to make lots of calls to debtors and creditors. All of this, compounded with the stress, will have an impact on productivity, morale and attitude to life in the workplace.”
How to help employees cope with rising costs
Bring in a third party such as the Financial Services Authority to offer basic financial advice
Be aware of organisations such as the Citizens Advice Bureau that can help employees cope with personal debt
Consider offering a helpline
Alert line managers to look out for signs that employees may be suffering from money problems
Review benefit packages. Offering employees discounted goods could make a real difference
Consider bonus or incentive schemes as a means of boosting motivation
Consider offering flexible or remote working to cut travel costs
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