The term “the cost of living crisis” has become common parlance in 2022, not only in New Zealand 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 NZ consumer price index hit 7.3 percent in the June quarter - its highest level since June 1990, driven by higher fuel, food, building, and household costs. Despite a tight job market, low unemployment rates, and yearly minimum wage increases, salary and wage growth has not kept up (the June quarter labour cost index was 3.4%).
Nearly 60% of Kiwis surveyed in Canstar’s Consumer Pulse Report 2022 said they spend more than they earn. Other recent research by not-for-profit organisation Orange Sky Aotearoa found that 62% of people struggle financially to make ends meet at least once a year, 27% do so at least once a month, and 16% said they struggle to make ends meet at least once a week. 22% had taken on a secondary income in the past year.
Despite a range of 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 Aotearoa. 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.
First and foremost, businesses have a duty of care under the Health and Safety at Work Act to eliminate or minimise risks to the health and safety of their employees, 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:
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.
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. US research by the Financial Health Network found that among employees with an annual household income of $US100,000 or more, 52% still reported they felt stressed by finances.
Learn more about getting pay right.
There can be a lot of stigma around mental distress and people may not open up about being under financial pressure (the Orange Sky study found that 23% of people felt too ashamed to ask for help). 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.
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.
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 contributions to KiwiSaver, assisting with student loan repayments, or offering discount schemes, or medical or other insurance, such as income protection or critical illness cover. 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.
Most Kiwis 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 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.
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.
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.