It’s safe to say the past few years have been some of the most testing we’ve experienced in modern times – not just in the UK but worldwide. It doesn’t seem like there’s an end in sight either, with the cost of living crisis rumbling on and a recession seemingly on the horizon. You only need to look at the annual rate of inflation hitting a 41-year high during Q4 2022 to realise the scope of the issues people are facing.
This of course comes after the ‘Great Resignation’ which saw people quitting their jobs in droves during the pandemic, a trend which our data highlights was still rife last year. In fact, a quarter of UK SMEs lost talent unnecessarily* due to them being made to feel undervalued. If you take this issue, alongside households tightening the purse strings, you could argue it’s only a matter of time before people begin looking for higher paying jobs to help withstand the challenges afoot.
Of course, HR professionals will be discussing exactly this with their business leaders with the aim of retaining the talent they need to meet wider business objectives. The question that needs to be asked then, is how can organisations retain talent in an environment where the grass appears so much greener?
Pay rises aren’t a silver bullet
When contemplating ways to support staff during the cost of living crisis and retain them in the long-term, many HR professionals will immediately consider pay rises. However, this may not necessarily be an option, especially as far as the board is concerned. Why so? Well, broad brush pay rises can create their own challenges in the long-term.
Many businesses have announced they’re increasing wages from 3 percent up to 10 percent to align with the current rate of inflation. However, with a recession on the horizon, it’s understandable that many business leaders will be looking to steady the ship rather than releasing large amounts of capital which would benefit the workforce in the short-term but potentially harm the company if a long-term economic crisis hits.
Pay rises aren’t short-term either, and in fact could be viewed as part of the ingredient for higher inflation itself. Also they can’t be “scaled-back” once inflation reduces. Not without a vast negative impact on morale and realistically causing people to look elsewhere for employment. With that in mind, it’s no wonder many companies don’t feel they’re able to (or don’t want to) use this tactic to support their employees.
Beware linking rewards to the cost of living crisis
In place of pay rises, I’ve spoken to many HR professionals and business leaders that are instead looking to (or have) reward employees with a one-off lump sum bonus to help through the cost of living crisis.
Again, on paper this sounds like a great idea. What employee wouldn’t accept a bonus right now? Especially with the festive period only just in the rearview mirror. The issue with this approach is the positioning more than anything. Once the word “bonus” or “reward” is used, many will begin contemplating how to spend it. Maybe a new TV for the living room, a PS5 now that stock availability is increasing in the UK or a holiday – it’s been so long since many people have managed to spend two weeks abroad.
No doubt morale will increase and staff retention will also, in the short-term at least. However, if the bonus is being spent on frivolous items then it isn’t hitting the root of the problem. The focus should therefore be on support. Tailored financial support for those on the lowest salary bands within a company that ensures staff can eat well, heat their homes and have a more bearable quality of life, despite the current challenges facing UK households. So how is that possible?
Cost of living support packages
As previously alluded to, the key here is support, not reward. It changes the perception of the gesture in the eyes of the employees and if given the right thought, can truly make a difference. Look at The Jockey Club’s winter support package for example, which consists of £750 paid out in four instalments over the winter months to any employee earning £42,000 or less. Being able to opt in or out was also key to ensure everyone felt part of the scheme.
According to The Jockey Club’s Chief People Officer, Helene Sharrock, “The winter support package was designed by our People and Finance teams, with critical input from our Business Involvement Group, to provide financial support during the current energy and cost of living crisis. It is a one-off package responding to the exceptional impact of the financial and energy market volatility.”
We worked with The Jockey Club to provide the ‘everyday smart egift card’ the package was built on, ensuring it could only be spent across 16 retailers selected to meet everyday costs, from all major supermarkets, to Hellofresh, National Express, B&M and B&Q.
It is also in the messaging around the support itself too so employees fully understand the sentiment behind the support. HR teams should also consider investing in financial education to complement these types of cost of living support packages, as there will still be employees who haven’t grasped the magnitude of the current situation, or realise how much worse things could get. Whether it’s running seminars internally, providing access to external personal finance experts or producing in-depth toolkits to highlight best practice financial management, it will play a key role in helping to move the dial. Prevention is better than the cure, so highlighting the importance of saving with uncertainty afoot will prove hugely valuable.
Fix the roof before it rains
HR teams that proactively go out of their way to help people through the cost of living crisis show that they give a damn about their staff. This goes a long way to increasing the likelihood of employees staying with the business long-term. Especially when thought is put into how such support can be given, weighing up the pros and cons of each potential avenue that could be explored before finding the right one for the workforce.
The key is to fix the roof before it rains and providing a cost of living support package, complemented by financial education, ahead of the recession that’s just around the corner, will achieve exactly that.
*From Prezzee whitepaper