How employers can help staff with the cost of living

The rising cost of living can negatively impact your employees, who may worry about reducing their outgoings and paying bills during times of high-interest rates and higher inflation.

Research by PwC found that 86% of UK adults are concerned about day-to-day living costs – and one-third (33%) think businesses should be responsible for tackling these issues.

Smaller businesses can think about ways to support employees by providing resources, including loans and information on topics such as saving money.

While increasing salaries is an option, wage increases may help fuel inflationary pressures, potentially locking businesses and the broader economy into an inflationary spiral.

However, increasing wages isn't the only solution.

A more holistic approach can help support employees and, in some cases, can be exempt from tax, both for the business and employees.

As a smaller business owner, you could explore several actions to help support your employees in economically challenging times.

Find out how your business can deal with rising inflation.

8 ways to support your staff during the cost of living crisis

1. Salary sacrifice schemes

A salary sacrifice can help save your employees money when buying certain services, such as child care and transport, such as cycle-to-work schemes.

It allows the cost of the scheme to be deducted at source for a PAYE employee, avoiding income tax from being applied to the sacrificed amount.

The sacrificed salary amount is then provided to the employee as a non-cash benefit, with common examples including:

• childcare vouchers
• cycle to work schemes
• gym membership
• some equipment, such as home PCs
• car parking
• on-site childcare facilities

2. Subsidised or free food and drink

Food costs can increase significantly during periods of higher inflation and providing free or subsidised food can be a helpful employee benefit.

Food and drink provided can be entirely free for all employees, or it can be subsidised so staff can purchase it for a lower price.

It's important to ensure that food and drink are provided so that all employees have equal access and that the free or subsidised food is of reasonable value.

That means drinks such as coffee, soft drinks, or water and food such as snacks, reasonable hot meals, and sandwiches are good options.

Expensive food and beverages, such as Champagne or luxury dishes, might be deemed unreasonable by HMRC and subject to tax and NI as a benefit-in-kind.

Doing so means that your business or employees won't have to pay tax or National Insurance on the value of the benefit.

Learn more about employee meal benefits.

3. Season ticket loans

For employees that commute to work via public transport, offering season ticket loans could be an option to help them spread the cost of travel.

A season ticket loan can benefit employees by splitting the large, single payment of a travel ticket into smaller, more manageable payments they can make over time directly from their salary.

The loan amount is viewed as a benefit in kind and is subject to tax and NI in the same way as salary.

4. Offer hybrid working options

During the Covid-19 pandemic, many workers reported that their daily spending reduced when working from home – 46% reported spending less directly, with 40% reporting they spent less money commuting to work via public transport.

With hybrid working becoming increasingly popular among UK workers, it could be worth re-evaluating your business's work style to accommodate this work approach.

Hybrid working may help support your employees to save money and may help improve employee retention and productivity.

5. Discounted employee benefits

Employee benefits can be a great way to attract new talent to your business, retain employees, and boost employee well-being.

You may be able to negotiate with businesses to secure discounted services for your employees, such as gym memberships, transport, experiences, shopping vouchers, and popular tech products.

Some employee benefit schemes offer discounted financial services such as mortgages.

6. Financial education

A lack of financial education can make difficult times, such as the cost of living crisis, challenging to manage.

Another way you could help support your employees could be to provide them with financial education and guidance through workshops and online courses.

These courses could cover essential topics such as:

• budgeting
• managing debt
• savings
• retirement.

The government-backed Money & Pensions Service offers free help to people looking to improve their financial well-being, along with money, debt, and pensions guidance.

7. Selling back unused holiday

It may not be common practice in many businesses, but some companies allow their employees to buy and sell unused holiday days.

Typically, a business might allow unused holiday days to be swapped for a PAYE payment to the amount of the unused time.

You'll need to ensure this is universally offered to all employees, and you might also consider allowing employees to purchase additional holiday days.

8. Could you give employees a pay rise?

Rather than handing out cost-of-living lump sum payments to employees, you could look into conducting pay reviews to give your employees a pay rise.

However, many factors are involved when considering increasing an employee's salary.

Considering the size of your team, the industry your business is in, and your business's financial health could help give you a clearer picture of how much realistically you can support your employees financially.

Read our guide on how your business can tackle the cost of living.