The cost of living – words that are striking fear into the hearts of every household in the UK at the moment. With rising fuel, energy and food costs, we are all feeling the pinch. And it is only going to get worse. More and more of our salaries is being sacrificed to cover escalating bills, and leaving us with empty pockets at the end of the month.
Current inflation rates are nine per cent – but the reality is that many of our everyday costs have risen by significantly more than that. Interest rates are increasing, which means that mortgages are getting more expensive. The government has launched various one off cost of living payments, but these are aimed at the most vulnerable, leaving millions of households still unprotected and at real risk of being unable to meet their bills. For many people, the financial support they may get from the government will literally be a tiny drop in a very large ocean.
And the future is looking bleak. The energy price cap is due to rise again in the autumn, inflation will continue to rise. It will fall eventually – but possibly not for another couple of years.
Rising cost of living – we’re all in it together
As an employer, your own costs are rising – and you can feel the stress and pressure from your employees. Often businesses get even less support from the government that UK households do, in combatting the effects of the rising cost of living. However, by cultivating a sense that we are ‘all in this together’, you want to be working with your employees, to ensure that everyone comes through as unscathed as possible. While empathetic, it would be unwise to make sweeping platitudes – instead a strategic, long term approach would create firmer foundations for survival and future growth.
As a business over the next few years, you need to focus on:
Protecting the employees you have
Protecting the employees that you have, and looking after them as much as possible. Alongside the rising cost of living, there is also a growing skills gap. The average cost of hiring a new employee (if you can find one) in the UK is £3,000. Add to that the inevitable lag required for someone to settle in and start working productively – you’d be better investing that £3,000 on existing employees as part of a long term reward strategy.
Keep an eye on profit margins and sales
Keeping a firm eye on your own costs and cash flow – whatever the nature of your business, as the UK cost of living grows, households have less disposable income and start to make decisions to NOT make purchases that are non essential. This has an inevitable kick back on the economy as a whole, in which sales decline, and the cost of products have to increase to cover the rise on the cost of bringing that product to market. To stay in business over the next few years, UK businesses are going to have to find the balance between maintaining sales and profitable margins.
Would a one off payment for employees help?
There have been stories coming in of some companies making one off cash payments to individual employees to help them combat the rising costs. Lloyds bank, for example, are giving 64,000 workers an extra £1,000. Rolls Royce is giving 14,000 UK workers a £2,000 one off bonus. Many companies that profited exponentially well during the pandemic, are now giving back to their employees in gratitude and recognition. If this is something that your company can afford, it is worth considering it – it demonstrates your commitment and gratitude to your employees, making them feel valued. It will also relieve the pressure on them – if a lump sum payment means that they can survive a few more months without worrying, then that will come through in their overall performance.
Developing a long term rewards strategy
That lump sum should, though, form part of a long term rewards strategy – a programme that will both provide financial support for employees to help with the rising cost of living, and help your business plan financially to mitigate any expected and unexpected price increases.
A rewards strategy incorporates all areas of bonus and commission structures, and job evaluations. Through implementing this strategy in a structured and organised way, your employees are motivated and engaged, both on a short term basis, and a long term basis. Because the communications are in place as to what to aim for, and what they need to get there, it gives them a greater sense of ownership and responsibility over their roles – values that have shown to be crucial to employee attraction and retention.
Contact us if you are interested in finding out more about our Rewards Strategy Consulting services.