This article was first published in First Voice. Written by Peter Crush, freelance business journalist.
With inflation hitting a 40-year high – and forecast by the Bank of England to carry on rising to 13 per cent by the end of the year – the oft-cited ‘cost-of-living crisis’ for employees isn’t just real, it’s a catastrophe. Some 2.1 million people are already using food banks, according to the Trussell Trust, while in-work poverty is at 17.4 per cent, the IPPR thinktank suggests.
The problem for small firms is that, with their own costs also rising, pay rises just aren’t on the cards. A recent NerdWallet poll of 402 SMEs backs this up, finding that 46 per cent have been unable to grow pay in line with inflation. So what can cash-strapped small businesses do to help staff deal with the cost-of-living crisis without resorting to inflation-busting pay rises? The following tips offer a few ideas.
1. Offer a one-off bonus
A one-off cost-of-living payment is a cheaper alternative to a permanent pay rise, but still shows employees they’re cared for. Larger firms that have already done this include TSB, Shoosmiths and Virgin Money (all giving staff £1,000).
2. Make salaries go further
When the value of money is falling, it needs to work harder. A plethora of benefits platforms now give smaller employees access to vouchers and thousands of money-off discounts to help do just this. Perkbox, for instance, claims staff can save up to £1,000 per year on everything from the cost of gym memberships to cinema tickets.
But it’s making everyday spend go further that Stella Smith, founder of Pirkx, argues is most effective. “We call this creating ‘found money’,” she says, “where staff get discounts on their ordinary spending – like groceries and clothes.” At a cost to small businesses of £4.50 per employee per month, Smith says the average staffer saves £2,000 per year just doing their usual spend. “There are also options to take cash-back, and pay it directly into people’s bank accounts,” she adds.
FSB members can access affordable wellbeing benefits for their staff through FSB pirkx.
3. Offer reward cards/e-vouchers
“As an immediate way to minimise employees’ outgoings, employers can provide e-vouchers and cashback cards to maximise employees’ spending power,” argues Jamie Mackenzie, Director at Sodexo Engage. “Cashback cards can reward employees for anything from a promotion to winning a new client and can go a long way in trimming everyday expenses.”
More niche providers include the likes of eatoutroundabout.co.uk, where employers reward staff with money-off vouchers for eating out. CEO Ali Gordon says: “SMEs are able to offer money off to staff without paying tax or National Insurance on the benefit, while staff can claim money off at local restaurants.”
But sometimes it’s the small gains that can add up. Britons spend more than £4 billion getting their morning caffeine fix from coffee shops, according to data from Mintel. Through provider Ello Group though, users of its Coffee Club scheme could save £3.45 a week – £179 per year.
4. Let staff take a second job
It’s often frowned upon, but with a third of workers planning to take additional temporary work to top up their incomes, according to data by Indeed Flex, bosses should perhaps consider bowing to the inevitable and being flexible with their schedules to enable staff to take on second jobs.
From contracts to conflicts of interest, our employment experts outline what you need to consider as an employer for staff working a second job.
5. Holiday trading
“This allows employees to sell back unused annual leave,” says Nadene Evans, people operations and employment expert at Zenefits. Normally, it is limited to five days per year, with each day ‘worth’ 1/260th of that person’s annual salary [a full-time employee works 260 days per year]. It’s important to remember that employees cannot go below the statutory minimum amount.
6. Give access to already-earned income
For the ‘just about managing’, it’s often a sudden, unexpected bill that can tip people over. To alleviate this, a growing number of small businesses are offering staff early access to their already-earned income if they need it. Through providers such as Wagestream, staff can get access to up to 50 per cent of their earned wages early, rather than wait until the standard end-of-month payday. Small businesses can set how much staff can access. Camden Town Brewery is one small firm that recently introduced it, and staff have already used it to pay deposits for flats or to meet unexpected costs.
7. Rework commission policies
“In recognition that the cost of living has increased, we’ve launched a ‘team commission pot’,” says Matt de la Hey, CEO at technology company inploi. “A proportion of every sale and renewal goes to a kitty shared by everyone – not just the sales team.”
8. Offer salary sacrifice schemes
At a time of increased financial pressure, the idea of sacrificing salary might not sound logical, but official salary sacrifice schemes are a way of giving staff non-cash benefits (such as a bicycle), at a much-reduced rate. In return for giving up part of their pre-tax salary, staff can typically save 26-40 per cent on the cost of a bicycle and/or accessories.
Since a portion of their salary is foregone, employees also pay less tax and National Insurance contributions on the amount sacrificed. Once they have their bike, users can save again on commuting costs. Salary sacrifice can also be used by staff to buy IT equipment, e-bikes and even electric cars – where savings of up to 40 per cent on the cost of an electric vehicle can be achieved.
9. Employer loans
Employers can offer employees a tax-free interest-free loan of up to the value of £10,000 per year. Not only is it interest-free to employees but, because it is not salary, small businesses will not have to pay secondary Class 1 NICs on the amount borrowed. Increasingly, these have been used to help pay for season tickets.
10. Offer support
Employers have a valuable role to play as signposters to other services such as budgeting tools (for example, MoneyHelper) and Citizens Advice, which can help identify which benefits or grants staff may be eligible for (such as the one-off payment of £650 to low-income households on means-tested benefits such as Universal Credit, as well as the £400 energy bills discount).
A number of debt consolidation providers – such as Salary Finance – offer employee debt consolidation services, which combine all of an employee’s existing debts into a single lump sum, and offer better-than-credit-card repayment rates that can be paid direct via payroll. It means staff can save money while also meeting repayment commitments. You can also point staff to debt charities such as StepChange and National Debtline.
11. Long service awards
At trade body The Institute of Export and International Trade, it’s recently introduced long-service awards worth £500 for five years’ service and £800 for 10 years’. “One member of staff has already used their 10-year award to buy a new cooker that they urgently needed,” said its HR manager, Amy Finck. This not only helps loyal staff make ends meet, but can also ensure those coming up to milestones have an incentive to stick around rather than looking elsewhere.