AAB: Cover your staff and business in cost of living crisis

With inflation at a 40-year high and the threat of further hikes in interest rates to come, employees are really feeling the pinch. The jump in the cost of living over the last 12 months is much higher than experts had predicted, mostly due to energy prices and sky-rocketing food and drink costs, which have increased by as much as 14 per cent.

Karen Thomson of AAB discusses some of the ways companies can support workers in the cost of living crisis

According to the Office of National Statistics, 89 per cent of adults are seeing their general cost of living increase compared with 62 per cent witnessing this last November.

There are demands for the government and high profit-making employers to do more to ease the pain, but many employers are asking themselves what they can do to help employees too. Karen Thomson of AAB discusses the issues.

How to support employees without putting profits at too much risk?

"There are options employers can consider to support employees, and help their business."

Increasing pay in order to help people afford the basics, such as food and energy bills, may be an option for some employers, but higher wages risk pushing individuals into a higher tax bracket – or even into a tax bracket where previously they fell below the thresholds to pay tax at all.

That’s great for the Treasury as it increases tax revenue without increasing tax rates, but while some of the people you are looking to help could benefit, some might not.

Giving employees some extra cash as a one-off payment or in installments is another option, and many companies are adopting this approach.

One business we are aware of is looking to pay each employee £400 in autumn, winter and again in spring. Another is providing a monthly cost-of-living payment to its employees, equating to £1,800 per year.

HSBC has given a one-off payment of £1,500 to its lowest-paid workers and MoneySuperMarket is giving employees earning less than £55,000 per annum a one-off £2,000 payment to help.

However, a one-off cash boost is just that and companies also need to consider some longer-term measures that can remain in place even when the economy starts to recover.

Longer-term support to help employees and the business

A Chartered Institute of Personnel and Development survey showed that employees whose workplace offers financial well-being assistance are more likely to agree their job will protect them from poverty, and 81 per cent said they would not move to another employer that did not offer such a policy.

Occupational sick pay schemes can also provide a helping hand and, with Covid-19 cases still around, maintaining full pay during any isolation period could alleviate some financial pressure on employees. Similarly, medical and dental benefits, or income protection benefits, can be very valuable to employees feeling the pinch.

Employers that offer a truly flexible working culture can help families manage the costs of childcare or other dependency responsibilities. If your policy reviews stalled during the pandemic, perhaps now is the time to review your family-friendly policy and see if it could be improved to help with cost of living pressures.

Could your company review career path options to promotion and/or upskill some of your workforce to higher-paid roles? Have you embraced apprenticeships? You could benefit from new talent via the apprenticeship scheme and, for larger employers that are paying the relevant levy, are you using your £15,000 annual allowance?

For smaller employers, ensure you are claiming the Employment Allowance, if you are entitled to it.

Put NATIONAL INSURANCE savings to good use

A salary exchange scheme for pension contributions, or other allowable benefits such as cycle-to-work schemes and electric cars, can save employees income tax and National Insurance (NI) and employers can save on NI too.Those NI savings could be put to good use, perhaps by increasing the employer pension contribution, or providing reward options. Other ideas include health cash plans, schemes offering rewards, such as discounted gym memberships or discounts off travel and at retailers, all of which can help ease the burden.

The cost of living crisis is going to be a rough ride, but there are options employers can consider to support employees, and help their business by

attracting and retaining talent.

The specialists at my firm, AAB, can help employers to pinpoint the options that would work best for their business.

Karen Thomson is a payroll director at AAB