Business Leaders Find Alternatives to Pay Increases in Cost-of-Living Battle

Salaries falling behind inflation, and continual hikes ‘won’t always be possible’ as a countermeasure, firms say.

The cost-of-living crisis is burgeoning, the war for talent rages on, and pay awards have been plateauing for six rolling quarters — falling behind inflation.

 

Employers are looking at how they can improve the employee experience, beyond hiking salaries.

Research by human resources firm XpertHR shows that nearly half of directors set pay awards higher than planned in the battle to attract and retain talent. There was stiff competition between companies to secure workers with the requisite skills.

In the survey, 52 percent of directors said they felt compelled to pay higher salaries to help employees keep up with the cost of living. This money came largely from reducing office space and overheads (42 percent of organisations), spending less on technology and innovation (40 percent), and organic business expansion (68 percent). But 63 percent of directors admitted that salary increases would not always be possible.

Even organisations that could pay workers more say increases would not necessarily be in line with inflation. Employers are considering other ways to invest in staff retention. Almost three-quarters (73 percent) are opting to put support and advice programmes in place.

Of those offering support, 56 percent have given staff a non-repayable lump sum or bonus payment. Amounts of between £500 and £1,000 were cited by some organisations, typically reserved for employees earning less than £40,000 a year. Payments are not consolidated into salaries, and this targeted approach means the additional cost is not an ongoing burden for employers. A quarter of respondents say they have opted to offer staff interest-free loans.

The data show that 53 percent of business leaders are conducting regular benchmarking of pay rates, while half are providing access to an employee discounts provider. Slightly fewer (49 percent) are offering flexible work locations and patterns, and 31 percent are offering better benefits and incentives.

XpertHR managing director Scott Walker says employers are being forced to look for alternative ways to help staff manage the cost-of-living crisis. “Financial wellbeing advice leads the way,” he said, “helping individuals understand the options available to them and how to look after their money.”

Walker says many employees are finding there is little money left after paying their bills. “We’re seeing an increasing number of employers getting creative.” The alternatives include repayable loans, non-repayable lump-sum payments, and even discount vouchers.

Employee assistance programmes can go a long way in demonstrating support, he believes, and flexible working and training could boost retention. “It’s still possible to support staff and build a strong employee experience,” he said.