The Cost of Living Crisis and Employment

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August 13, 2022

The Cost of Living Crisis and Employment

Inflation in the UK has had many adverse consequences, one in particular is the cost of living crisis. This is where the cost for essential goods, such as groceries and bills, are rising far quicker than the average household income and this has led to a fall in real income. The current cost of living crisis shows little to no sign of ending any time soon.

The National Institute of Science Education and Research (NISER) made an approximation that income for the poorest 60% of society is outweighed by total bills and because they continue to rise, this figure is only likely to increase. The Law Society Gazette quoted that with the cost of living now increasing, that there is a “very real risk of simply not being able to make ends meet”.

What does this mean for employees?

The brutal cost of living crisis is affecting everyone. Concerning employees, they could face hardships and this could negatively impact their work. Every employer is required by law to protect the health and safety of their workers and if it is made known that the crisis is affecting an employee in such a negative way and it noticeably affects their work, should employers do anything about this? There are a few things that can be done.

Entitlement to a pay rise?

One thing that employers can do is to increase salaries. This would most likely be limited to the larger companies, as the small ones themselves are being hit heavy by the crisis. One example of a large-scale business increasing their salaries is with Barclays Bank. As of the 1st of August, they are awarding just under 40,000 of their staff a pay rise. However, there is no legal obligation imposed on employers that they should increase their employees’ pay to account for the rising expense of living. Technically, an employer is required to abide by the terms outlined in an employee’s employment contract. In that regard, many firms will consider non-financial methods of assisting employees because of the fact there is no requirement to increase salaries.

One method that this might entail is to guid employees to acknowledgeable support systems that would help with budgeting and financial education. this would be in an attempt to help employees think about their finances and to create discipline. For example, rather than driving to work and having to pay extortionate fuel prices, employers could think about advertising and implementing cycle to work schemes and such alike. This would undoubtably help employees with their financial difficulties.

Hybrid Working

Hybrid working gained significant popularity with the coronavirus pandemic and now employers can use this to their advantage to help counter the issue that the cost of living crisis have caused. This is seen as a solution to employees financial issues because it saves on the costs of commuting and might generally help with an employee’s wellbeing. However, from a legal standpoint, it is crucial that a worker’s contract be modified or updated to reflect their present working arrangements. This can be useful in avoiding problems if disputes arise further down the line. However, an issue that can arise from hybrid working is that in the winter months when heating is required during the day, the costs of bills may see a larger increase and this could be a cause for concern for hybrid workers. 

Non-Financial Help

There is no universal solution to the cost of living crisis as not all employees will be affected in the same way and it is important for employers to recognise that versatile forms of aid may be required. Initially, employers should ensure that they have great communication with their employees, such as through a mentoring system. This would help the employer find out the issues present and any concerns. The information that can be gathered from such an approach will then help the employer to find what the best course of action is for a solution.

To summarise, employers are not obliged by the law to increase pay in accordance with the cost crisis and an increase in salaries is unlikely for most employees. However, employers can take various steps to ensure that their employees wellbeing is maintained.

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