The cost-of-living tracker published by the Joseph Rowntree Foundation (JRF) recently showed that 7.3 million UK households on a low income were going without essentials such as showers, transport and warm homes. A total of 5.5 million of those have had to cut down or skip meals because they cannot afford food.
The stress of going without essentials contributes to poor mental health and a loss of sleep. For those going without essentials, the JRF tracker found that nearly half of respondents (47%) reported poor mental health and 45% reported a loss of sleep compared to 14% of households not going without essentials. This backs up findings from the Mental Health Foundation on the impact of the cost-of-living crisis, which found that 10% of adults surveyed in the UK reported feeling hopeless, 34% feeling anxious and 29% feeling stressed.
It is inevitable that all of this will take its toll on performance at work. Research shows a strong correlation between employee wellbeing and productivity and performance.
However, there are a number of positive steps that employers can take to mitigate the impact of the cost-of-living crisis on their employees. The pandemic saw many employers stepping in to support their employees in new ways when circumstances changed. The cost-of-living crisis is no different.
First, employers can make sure that they are paying the real living wage for all employees and are in a strong position to engage with external contractors on this issue too. A survey by PricewaterhouseCoopers (PwC) last summer found that eight out of ten large companies were looking at ways to help employees and over half (53%) were implementing or considering focused pay rises for essential workers. The PwC survey also indicated that employers are looking at one-off bonuses, assistance with other costs such as travel or home insulation, as well as setting up hardship funds.
At Fair By Design, we are particularly interested in how greater flexibility in how people are paid, as well as how they pay for things, can help people on low incomes. Therefore, a second way that employers could support employees is by setting up an Employer Salary Advance Scheme (ESAS), which enables employees to access their wages as soon as they have earnt them – that is, before payday.
Employers can also provide low- or no-interest loans to cover season tickets or electronic equipment. A free or low interest loan not only enables employees to avoid paying more for a more expensive form of credit, but it also enables employees to avoid the poverty premium incurred for paying monthly rather than annually for something like a season ticket. Employers should seek professional advice to ensure loans fall within the exemption from having a credit licence.
These solutions can prevent the need to access high-cost credit at a time when credit is scarcer and more expensive. In the first quarter of 2023, lenders surveyed by the Bank of England reported a reduction in the availability of unsecured credit provided to households and a fall in the approval rate for lending. Consistent with Bank of England data, Fair 4 All Finance have found that 44% of community finance lenders had tightened their lending criteria in response to the economic environment in late 2022. Even though application rates were higher, they expect loan approvals to be lower than usual due to tighter affordability criteria and credit risks.
Finally, sensitively offering employees the opportunity to access financial advice and digital literacy training opportunities can also empower employees to get the best out of their finances.
Navigating the cost-of-living crisis is not easy, but employers have a key role to play in maximising the wellbeing and potential of their staff.
Maria Booker is the Head of Policy at Fair By Design.
This article was published in the latest edition of Centre Write. Views expressed in this article are those of the author, and not necessarily those of Bright Blue.
Read more from our August 2023 Centre Write magazine, ‘Back to business?’ here.
