UK workers are getting worse off.
Rising prices, spiking mortgage payments and soaring bills have left the average household £2,100 poorer, according to research by the Resolution Foundation think tank.
What’s more, the end of the Government's £400 energy support payment means that most households will be paying the same amount or more for their energy bills this winter as they did last year.
All of this really matters for HR.
Research carried out by Nous for Business has found that 88% of HR leaders have seen more requests for pay rises since the start of the cost-of-living crisis.
This is hardly surprising. When so many people are struggling, it makes sense that employees are looking to earn more money. Inflation may have cooled somewhat from the painful double-digit highs we saw a year ago, but prices are still rising and cutting into people’s spending power.
A big problem for HR that our research uncovered is that companies are struggling to keep up with these pay rise requests – and it’s making the issue of retention even harder to manage.
Of course, staff leaving for better pay is nothing new. But the squeeze on households’ everyday finances means that moving on in order to get a pay rise – even a small one – is becoming more common.
This means that other elements of an employer proposition, including crucial factors such as workplace culture and quality of work, are losing some of their power.
Our research found a massive 90% of HR leaders are concerned that being unable to meet pay demands is putting them at risk of losing talent. Three quarters said that retention is currently a major issue for their organisation.
This puts leaders in a bind. They know that their teams are struggling with their outgoings, but simply can’t afford to get serious money into their pockets via payroll.
In fact only 38% of the firms surveyed by Nous were able to give pay rises in line with inflation in their last pay review. This is down from 46% the previous year.
And according to the latest stats from the ONS, workers saw a 1.5% pay decrease last year when adjusting for inflation.
Losing talented team members is itself an expensive business. Hiring and training new staff comes with huge costs, and no manager wants constant churn in their team.
So what can HR leaders do?
Meeting pay rise requests they can’t really afford can put an entire business in jeopardy. We saw clear evidence for this in our research too – 78% of HR leaders said they were worried that if we continue to see such high levels of wage growth, this could risk harming the performance of their company.
Increasing prices to account for higher pay doesn’t work either, instead leaving businesses at risk of ending up uncompetitive.
Clearly doing nothing isn’t the answer. Quite aside from the issue of retention, all the HR teams I speak to want to genuinely help people during such a challenging time.
Firstly, it’s important that managers and HR teams are willing to have open discussions about everyday financial issues with their teams.
Managers need to be equipped to support staff who are going through a difficult time money-wise, and never shrug off concerns as “not their problem”. This isn’t always easy, and businesses may need to consider training team leaders to deal with financial wellbeing issues.
They can also look into financial support that solves the issue of rising bills directly.
The reality is that most people are overpaying for their household contracts, often to the tune of many hundreds of pounds a year.
At Nous, we consistently see just how much our members can save when we switch them to fairer deals – and how much of a difference HR leaders can make by offering access to our money-saving tool.
Rolling out solutions that help with the problems that really matter to them has a powerful influence on how employees feel about their company.
I’ve written before about the demise of trendy workplace perks that don’t actually help people, in favour of solutions (like Nous) that target the most important issues facing workers.
It’s great to see more and more businesses cottoning on to the fact that these solutions are a powerful tool in keeping employees motivated and happy.
While cost of living pressures are set to be with us for some time, balancing affordable pay rises with impactful support can offer a lifeline to HR leaders.
No-one should be dealing with the cost-of-living crisis all alone. We’re building a new service to liberate households from drudgery and make people’s lives simpler and fairer.