With rising inflation and interest rates, many employers are looking for cost-effective ways to support their staff. We explore the low or no cost options.
Employees are facing huge financial challenges and stress during this cost-of-living crisis. The CPIH index remains stubbornly high despite dropping slightly to 7.8% as of April 2023, with food and non-alcoholic prices rising 19.1% over the past year, according to the Office for National Statistics.
Meanwhile, the base rate at 4.5% is at its highest level since 2008, which significantly raises the cost of credit and mortgages for individuals. And to make matters worse, the average cost of full-time childcare for children under two years of age has increased to £263 per week, rising to £321 in London, according to the National Childbirth Trust.
As well as facing more pressure to raise wages, employers’ own costs, such as core materials, energy costs, rent, and insurance costs, are increasing. We are also seeing the start of a war on talent, particularly for highly skilled individuals and for low-paid individuals. This is because, unusually, costs and wage pressures are rising at the same time. But we are also seeing a vibrant market in terms of recruitment with several vacancies, which means employers are seeing talent move to competitors.
Top challenges for employees
Mercer’s recent Inside Employees’ Minds survey highlights the challenges that employees are facing – and it is not just lower income workers (earning less than £40,000) who are suffering financial stress because of high inflation. Almost 60% of high-income earners (earning over £80,000) have lowered their spending due to price increases, while almost 70% of low-income earners have cut their expenditure.
Among employees aged 18-54, covering expenses is the biggest concern. Meanwhile, just a quarter of low-income earners are confident about being able to retire, compared to 57% of high-income employees. One-third of employees prefer more flexibility in the workplace than they have today.
Attract and retain talent
Financial stress is one of the major causes of stress, and one of the best ways to attract and retain people is to create a happy, inclusive and engaging workplace.
Employers that lack big margins to be able to hand out huge wage increases need to find a way to engage, attract, and retain employees. They need to find ways to help their employees and this can be achieved at low to no cost for you as an employer but drive significantly more value and more impact for your workers.
Employees are facing a whole host of cost pressures – but the biggest ones are often mortgages, cars, childcare, and food.
It is, therefore, worth reviewing your benefits package to see what else you could be offering employees, and it doesn’t have to cost you a thing. At Mercer Marsh Benefits (MMB), we offer a free, no-obligation audit of your benefits offering.
Salary exchange: childcare and electric cars
Salary exchange or salary sacrifice is a contractual arrangement whereby an employee gives up part of their basic earnings in return for a non-cash benefit. But it is also helpful for employers by allowing them to make NIC savings.
While employers are very familiar with salary exchange, usually in the context of pension contributions, few know it can also be used for other things, including childcare contributions such as nursery and electric cars.
By offering a Workplace Nursery Scheme through salary exchange, you can help your employees save a minimum 20% on their nursery costs. If they are a higher rate taxpayer, they can save 40% or around £400 a month on childcare costs, based on average weekly costs of £263.
Another win-win for employers and employees is the electric car scheme where workers can use a portion of their pre-tax salary to help buy an electric car. Not only do employees reduce their motoring costs and benefit from not paying tax and NI contributions on the portion of their salary they have sacrificed with current HMRC treatment, but it also helps employers improve their environmental credentials while reducing their own NI costs.
Mortgage advice
With mortgage interest rates rising again recently, an individual who is coming towards the end of their fixed rate could see their mortgage repayments go up by hundreds of pounds a month. While employers cannot control interest rates, they can help their employees access the best mortgage rates by setting up an arrangement with a mortgage advice company, which can offer them free independent mortgage advice and access to mortgages that they would not have been able to otherwise.
Discount vouchers
For a small set-up cost, you can also offer your employees discount vouchers to help them save money on their food shopping, go out for meals or for holidays. This costs as little as just £2.30 per employee each month – a small price to pay to help your employees during this cost-of-living crisis.
Review your benefits package
This is just a snapshot of what employers can offer their employees. Much more is available. At MMB, we offer a wide range of benefits from fitness and health to genetic testing and pensions.
Employers can brand these benefits in their company name and offer more for employees than they currently receive.
At MMB, we offer a free, no-obligation audit of your benefits, so you only pay for our services when you decide to when you decide to work with us.
We help you understand your workforce, so you can tailor your benefits package to what works best for your staff. We will talk you through what we can do to help you support your employees.
At a time when people are more likely to switch jobs for a small change in salary during this cost-of-living crisis, employers can improve retention by reviewing and updating their benefits packages to make them much more attractive to employees.
For further information, please contact Georgi Paget or visit www.mercer.com
