If you are a company director or in a position of authority in a company, you may have wondered how you can support employees through the cost-of-living crisis. It can be difficult to balance the accounts to ensure you remain profitable while also catering to your employees’ financial concerns.
These issues can often be perplexing but there are several factors you should consider when deciding how to support your employees and ensure you secure company growth for years to come.
Let’s dive in and discover the intersection of employee finances and workplace productivity.
Wages, Benefits and Company Support
There are a few ways a company directly impacts employees and their ability to weather financial uncertainty. Primarily through wages but also:
- Company benefits,
- Financial support packages,
- Financial advice.
When it comes to wages, the calculation is fairly simple, you should be aiming to pay an employee at the market rate (or slightly above) for their skills, service and time.
For example, if you are operating in a competitive industry, you should aim to remunerate employees generously to promote company loyalty. With the increased use of online job markets it is now easier than ever for employees to seek employment elsewhere.
You should also consider other perks and benefits you can provide to employees. Quite often, these perks can be provided and be tax efficient. For example, with the NHS under a tremendous burden, employees are willing to take a slightly reduced wage package in return for private medical insurance.
Private medical insurance is an excellent example of where you can set yourself above the rest as an employer. Policies are often discounted when purchased as group packages, and if your employees get sick, you can get them back to work sooner.
Productivity and Profit Margins
It is no secret that underpaying employees is likely to demoralize them and ensure stagnancy within your company.
You should always be looking at ways to incentivize employee productivity. This can be achieved without increasing base salaries. For example, you could offer targeted bonuses.
Be cautious with bonus structures, it is common for employers to promise the earth but set the bar too high for employees to hit. A good bonus structure is created to reward target hitting and be achievable for employees.
Essentially, the easiest way for a company to boost productivity is to reward employees for the work they do in a fair and transparent way. Companies that pay employees experience much higher productivity compared to low paying companies.
Common Issues Employees Face
Of course, as an employer, once you have remunerated your employees for their work, their financial position beyond that is beyond your control.
This is a pitfall many employers fall into as they want to help struggling employees by going above and beyond providing fair pay.
You should remember, an employee is more responsible for their financial situation than you are as their employer. If the employee needs more money then there are plenty of ways they can manage their finances and it is not your responsibility to cater beyond your normal obligations.
You may wish to implement money management courses to help your employees understand budgeting and there are several companies that provide bespoke workshops to do just that.
The Cost-of-Living Crisis
Recently, the cost-of-living crisis has been subject to much reporting in the media and some companies have had a knee-jerk reaction to try and help employees.
It has been common over the last year for employers to increase wages considerably with little consideration for the impact this has on the wider economy and most importantly the company’s bottom line.
It should come as no surprise that across-the-board companies have increased wages for employees with the figure currently averaging around 6%. The fact is many of these companies cannot afford such pay increases and since January hundreds of thousands of companies have found themselves in financial hardship – or worse, failed.
The Temptation to Increase Salaries
It is clear the temptation to increase salaries to reflect the cost-of-living crisis should be carefully measured against your company’s financial means.
What’s more, you should also factor in whether you are getting value for money by increasing wages. Increasing wages can lead to improved profitability but if you are only increasing salaries in line with the wider market, you will find productivity will remain consistent.
This means companies are increasing expenditure on a wholesale basis without generating a higher return on investment. A recipe for disaster.
How Wage Increases Impact Inflation
With wages rising, the cost-of-living crisis is exacerbated. This is because wage increases sustain the inflationary pressure on the market rather than combat it.
The government signalling has been clear, employers should not be increasing wages. It seems cruel, but the old expression be cruel to be kind is never truer than in an inflationary economy. This is because inflation persists longer with increased wages, and it is better for your employees to have a short-term financial reset than a prolonged period of financial difficulty.
Financial Difficulty and Bad Credit
Finally, you should consider how financial difficulties can impact your employers away from the workplace. A common issue now is housing costs, and many employees are struggling to keep up with bills.
As an employer, you should be aware that this can cause credit issues, which is particularly important if you are operating in a regulated area. The good news is that you can implement the above mentioned financial workshops at relatively low cost and employees can access bad credit borrowing if they need to restructure their finances.
The overall advice is, you should be paying employees the fair market rate for their services, have a range of benefits provided by your company, and offer support where it is necessary. You should, however, remember you are operating a business and a company that goes under will cause far more financial hardship to your employees than any short-term difficulty they are facing. Lastly, the cost-of-living crisis will not last forever, economies are very resilient and bounce back much faster than expected.
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