Helping employees through a cost of living crisis
The term “the cost of living crisis” has become commonplace, not only in Australia, but across the world. It refers to prices for goods and services rising faster than people’s disposable incomes, making it harder for people to make ends meet.
In the first quarter of 2026, Australian household spending rose 1.6 per cent (largely driven by rising fuel prices in response to conflict in the Middle East), and the Consumer Price Index (CPI) has risen 4.6% in the 12 months to March 2026. Wages growth - measured by the Wage Price Index - rose 3.4% over the twelve months to the December quarter.
Rising costs affect employers as well as employees, especially when fuel prices spike or raw materials get more expensive or harder to obtain. Staff might also start asking for pay increases, more flexibility, or to be able to work from home due to increased costs of commuting.
So how can your business balance these increased pressures, and should you look at providing help to employees during tough economic times? And if so, what are some practical things you can do when other business expenses may also be rising? Let’s explore the issues.
Why should employers care about cost of living pressures?
First and foremost, businesses have a duty of care under national Work Health and Safety laws to ensure the health and safety of their workers, which includes their mental as well as their physical health.
Financial stress may not appear to be an immediate problem in the workplace, but it is proven to affect mental health, which impacts workers' and the business’ ability to perform and thrive. Here are a few stats:
- 66% of Australians feel mildly, moderately, or severely stressed by their financial situation. 88% of moderately and severely financially stressed people say their finances affect their work productivity (AMP’s Financial Wellness Report 2024).
- The average employee spends 11 hours each month dealing with personal financial matters at work. 22% take time out from work to consult with lenders, creditors or collection agencies (AMP Financial Wellness Report 2024).
- Financially-stressed employees are 5 times more likely to be distracted at work and 73% say they would move to another employer that cares more about their financial wellbeing (PwC’s Employee Financial Wellness research).
Increasingly, business leaders recognise the importance of their employee’s mental health and wellbeing, and the wider social responsibility to provide a positive, supportive work environment for their team members.
We understand it’s not always easy when businesses, especially smaller ones, may be feeling the squeeze too, with rising costs and shrinking margins. Not all organisations can afford to give their people an immediate pay raise, but there are plenty of things that you can do that are both practical and affordable.
Here are 8 tips you can implement today to help ease the burden of the cost of living for your employees.
Tips for supporting employees through cost of living spikes
1. Pay your employees fairly
Obviously, ensuring you pay your people fairly is a good place to start. Legally, all businesses have to pay workers at least the minimum wage, but an increasing number of employers are joining the Living Wage Movement that raises hourly rates by a couple more dollars.
We recommend scheduling annual pay reviews, so your rates remain competitive and your employees feel well remunerated and valued.
Beyond that, you may be able to offer other monetary assistance, such as one-off bonuses, or look at other creative measures, e.g. interest-free crisis loans or income streaming (where people can get money before payday).
But it’s not just about money. AMP’s Wellbeing research found that one in 10 employees earning $100,000 or more still experiences financial anxiety.
Learn more about getting pay and benefits right.
2. Be open and supportive
There can be a lot of stigma around mental distress and people may not open up about being under financial pressure. If business leaders and managers are approachable and empathetic, it builds a culture where people feel able to talk about challenges (not only money issues) and can help you understand the pressures people may be living with.
Think about how you can support employee wellbeing and talk honestly with your people, asking them about ways you might be able to help. Source and share helpful information and resources. If you have an Employee Assistance Programme, make sure everyone in the organisation knows about it. If you don’t have one, you should consider it. There are also external services that offer free assistance with mental and financial health.
3. Ensure your payroll systems are accurate and reliable
Again, this may seem obvious, but when people are depending on their income to pay bills, they need it there when expected. So make sure your payroll system pays people correctly and on time. If you’re still doing anything manually, look into the improvement and efficiencies software can bring.
We explore the top things to look for in a payroll service in this post.
4. Review your benefits and how you can tailor them to employee needs
Now is a good time to review your existing employee benefits and see if they are what people need in the face of rising costs and rates of financial stress.
You could look at extra leave or "mental health days", increasing your fringe benefits, such as discounted loans, assistance with childcare costs and school fees, or offering private health or other insurance, e.g. income protection or critical illness cover (you will have to look into the fringe benefits tax implications).
A UK study by YuLife found life insurance was an important employee benefit (with 48-63% of respondents saying it was important to their sense of financial wellbeing).
5. Provide financial wellbeing assistance and education
Most Australians receive no formal financial education, so looking at helping employees develop money management skills can be a real aid. Many experts stress a focus on guidance on a range of issues such as budgeting, managing mortgages and debt, investment, and saving for retirement.
Forming new habits can take time, so measures to improve employee financial skills should be seen as an ongoing process, rather than a quick-fire solution. There are a range of organisations that partner with businesses to offer free or low-cost financial capability and wellbeing initiatives.
6. Offer flexible work arrangements
Flexible and hybrid work is very much an established part of the employment landscape and employees have a legal right to request flexible work arrangements, which you must consider carefully and fairly.
Allowing employees to work from home (where possible) or change their hours or start/finish times can help them save on transport, food and other costs, such as childcare. A better work-life balance also contributes to overall mental wellbeing and engagement.
7. Provide transport assistance
Not all businesses can offer work-from-home arrangements, but there are other initiatives that can help employees with rising transport costs, from additional financial support and reimbursements to carpools and encouraging the use of cheaper (and greener) travel modes by providing bike storage and charging points for electric cars.
8. Other perks
Small things can add up to helping employees save money and many organisations are offering more than just free tea and coffee, with on-site food, free lunches and snacks, and restaurant vouchers. Others offer staff discounts on their own products.
Attractive perks build company culture, boost employee morale and retention, and make the business a more appealing place for new hires.