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An employer’s guide to supporting employees through the cost-of-living crisis

High costs of living are causing many employees to experience significant financial strain, but if your business is also facing rising costs how can you support and retain staff without a net loss to your business? In this article, we look at how you can help your employees to navigate the cost-of-living crisis, examining the costs and benefits of different monetary and non-monetary support measures.

Why is it important to offer additional support during the cost-of -living crisis?

It is crucial to appreciate that some employees may be struggling financially in the current economic climate and outside stressors could impact on their ability to attend and perform at work.

Increases in financial burdens such as interest rates on mortgages and other loans and increasing costs of rents and essential goods and services may cause or exacerbate employee mental health problems. Financial concerns may preoccupy employees and if combined with insufficient sleep, poor nutrition, or a lack of a warm, safe and secure home, will undoubtedly mean poor productivity and could cause increased sickness absence. This crisis therefore isn’t just a concern for your employee welfare – it has the potential to impact the productivity, output and profitability of your business.

Financial concerns are also a key factor when employees are considering their employment options. If struggling to make ends meet, employees will likely consider whether they could maximise their earnings elsewhere or save costs if they change jobs. When employees leave, it can impact client relationships, productivity and lead to further costs as you face recruitment fees to replace them. There’s also the risk that any new starter wouldn’t be as good as the staff you lose.

In a world where these financial challenges are ongoing and unlikely to improve anytime soon, employers should carefully consider how this shift could impact their business. What options do you have to help employees in this tough time whilst also protecting your business?

Financial incentives for employees

In a time of financial strife, offering staff more money is an obvious way to support them and to help you retain your talent. This can take many forms:

  • Salary increase – this is the most direct way you can assist with an employee’s financial concerns. A higher level of pay will help them pay bills and may help secure the mortgage they need. It’s worth considering though that a pay rise is forever, not just for one year, so your business will need to be in a position to maintain this increased salary and – indeed – move up from this for future pay rises. Once their salary has gone up, it’s unlikely to come back down.
  • Bonus – introducing or increasing a bonus payment on a quarterly or annual basis enables you to propose a financial incentive to improve employee morale. It can be a better option for your business’ cash flow than an increased wage bill, which is payable every month.
  • Interest free hardship loan or season ticket loan – a short term interest free loan to cover costs for an employee who is struggling financially may ease pressure for that individual and inspire loyalty. If travel expenses are not already paid or if remote working is not possible, a season ticket loan could assist employees in the short term with rising costs of travel. This will have the benefit to your business of improved attendance at work.
  • Cash allowances – these can be paid income tax free to employees who are required to work from home under the conditions of the ‘Working From Home allowance’ and can top up an employee’s income if home working is applicable. This comes at a low cost to your business, but this additional payment is likely to have a positive impact on the morale of your employees.

Non-monetary and creative incentives to consider

The above mentioned options are great for your employees and financial reward can help you retain talent. However, times are hard for businesses too and giving financial reward may not be something your business can afford in the short term.

If this is the case, there are still other ways for you to offer support and flexibility which can help in a cost-of-living crisis. These non-financial benefits could be just as worthwhile to struggling employees as cash, and they may indeed be far more palatable for your business.

Some creative ideas could include the following:

  • Wellbeing, Employee Assistance Programmes (EAPs) and counselling - introducing or updating an employee wellbeing policy is a cost-effective measure. A comprehensive policy will encourage open communication about wellbeing concerns which can include financial worries and how that’s impacting the employee’s life outside work. This measure could be extended to give employees access to resources and guidance from external organisations to help address financial stressors and to provide individual counselling.
    If you already have an EAP in place, you would not incur any additional cost as you would simply be signposting your employees to support that’s already available to them but which they may not have thought about. If you don’t already have this in place, there would be an initial cost to get it implemented, however the benefit to employee mental health and productivity could outweigh the upfront costs and can build on any support you already have in place.
  • Personal and professional development – where an immediate change of position or a promotion isn’t possible, it can help employees know what they need to do and when to help them progress. Offering professional development can make employees feel valued and know that your business is investing in their future. Confidence that a future promotion or pay rise associated with training is possible may ease employee concerns as their financial strain is likely to be shorter lasting. Meanwhile, your business is adding value by upskilling and inspiring employee loyalty.
  • Flexible working – flexibility has become a key employment issue over recent years since the pandemic. Many employees now place a significant value on their ability to work around their lifestyle, for example working from home to allow them to do the school run. From a financial standpoint, offering your employees the option to work remotely could significantly reduce their commuting, food and drink costs and it will enable them to better balance their work and personal commitments.

    Flexible working could also mean lower childcare costs if employees can work around school or nursery hours, for example. This flexibility can lead to higher job satisfaction, lower turnover rates and enhanced reputation. The current structure of your business may limit who you can offer remote or flexible working to, and implementing remote work policies may require initial investments in technology and infrastructure, but the long-term benefits could outweigh the costs. Before implementing this measure, ensure that your employee agrees to this form of support. Our employment law solicitors can help update employment contracts or your flexible working policy.
  • Access to discounts – if your business has partnerships with local gyms or shops, you can pass discounts on to your employees to ease their costs. Gym membership can also encourage healthier living and reduced sickness absence. Referrals to local businesses may also convert into return business from their staff and customers, boosting sales for your business.


In spite of its challenges, the cost-of-living crisis can provide you with an opportunity to demonstrate your commitment to supporting your employees and creating a more sustainable working environment. By being creative and exploring monetary and non-monetary support measures, you can help alleviate financial stress, enhance employee wellbeing, and foster a more resilient workforce. While implementing support measures may demand upfront costs, the long-term benefits to employee financial and mental health, satisfaction, retention, and productivity make them a worthwhile investment. If you would like assistance with implementing any of the above measures our specialist employment solicitors can help.

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