The term “the cost of living crisis” has become common parlance in 2022, not only in Australia but across the world. It refers to the effect high inflation is having on people’s disposable incomes and ability to make ends meet.
The consumer price index hit 6.1 percent in the June quarter - its highest level in 21 years, driven by higher fuel, food, building, and household costs. Despite a tight job market, low rates of unemployment, and yearly increases to the minimum wage, salary and wage growth has not kept up (annual wage growth for the March quarter was 2.4%).
Three out of five Australian households surveyed in CHOICE’s recent Consumer Pulse survey were concerned about their level of disposable income and 23% said they were struggling to get by on their current income. Other recent research by Mozo found more than half (54%) of Australians are concerned about their level of debt, with 15% saying that they will struggle to repay it in the future. The Australian Bureau of Statistics estimated 867,000 people were working more than one job in the December quarter - the highest number since it began keeping such records in 1994.
Despite measures introduced by the Government to help alleviate the problem, it's obvious that the hikes in the cost of living are affecting a large proportion of employees across Australia. So, should businesses look to help their people get through these tough times? And if so, what are some practical things you can do? Let’s have a look.
Why should employers care?
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:
- 70% of Australian employees spend time at work each week worrying about or dealing with money, irrespective of their position or level of income, at a cost to employers of over $47 billion a year (Gallagher Employee Financial Confidence Report).
- AMP’s Workforce Wellbeing research found 14.5% (1.8 million workers) are severely or moderately stressed about money, making them ineffective at work for approximately 7.7 hours a week and absent for a further 1.2 hours a week through sick leave..
- People who are financially stressed are 10 times more likely to not finish daily work tasks, 9 times more likely to have troubled relationships with coworkers, and 2 times more likely to be looking for a new job (Salary Finance’s 2nd Annual Report 2020).
- 49% of UK employees believe it’s a workplace’s responsibility to improve their sense of financial wellbeing beyond legal obligations (YuLife).
- 61% of UK adults said a workplace’s willingness to support their financial wellbeing contributes to their decision to join a new workplace or to stay at their existing one (YuLife).
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 etc. 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.
How you can help your people
Pay 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 a number of employers are joining the Living Wage movement. The living wage is calculated as 60% of the median full-time adult wage, raising hourly rates a few dollars above the minimum (before any penalty rates or casual loading).
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 Workforce Wellbeing research found that one in 10 employees earning $100,000 or more still experiences financial anxiety.
Learn more about getting pay right.
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 management is 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.
Accurate, reliable payroll
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.
Find out about the top things to look for in a payroll service.
Look at your benefits
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).
48% of respondents in YuLife’s UK study said life insurance was important to their sense of financial wellbeing, rising to 63% amongst those who live in households with children.
Read more about the best benefits to offer employees.
Financial wellbeing assistance and guidance
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.
Flexible work arrangements
Flexible work is very much an established part of the employment landscape these days, and allowing employees to work flexible hours or from home can help them save on transport, food and other costs, such as childcare. A better work-life balance also contributes to overall mental wellbeing.
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 to carpools and encouraging the use of cheaper (and greener) travel modes by providing bike storage and charging points for electric cars.
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.
