The Cost of Living Crisis
Friday, September 9, 2022
Friday, September 9, 2022
Many are already feeling the effect of the cost of living crisis, but the impact is not limited to the individual. Many Small and Medium Enterprises (SMEs) are also contending with the impending economic strain.
The panic amongst the general public has seen a decline in spending which has further implications for businesses, and looking ahead it is anticipated that a recession is awaiting us in 2023.
So, what can be done to mitigate the problem?
Practical Steps for Employers (SMEs)
Cut back on Growth Plans & Hiring Freeze– if you were planning to onboard new staff, it may be worth reconsidering whether that money could be put towards other expenditure to improve cash flow. However, as all business requirements are different, it may be imperative for some businesses to push ahead with growth plans to survive this period. This should be reviewed to understand whether a temporary hiring freeze would be beneficial for the business.
Increase Prices – whilst this option may stir anxiety about whether customers will continue to use your business, it must be considered whether small increases can be justified. This could be limited to particular products or services so that your customer base is not deterred.
Review Operating Costs – time should be taken to audit the running costs of your business. This will allow you to identify any budgets which can be squeezed and savings which could be made. This may require changes to your supplies and whether you can reduce or swap to cheaper products, or reducing team budgets.
Given the current inflation of energy bills, consider the energy saving measures that can be implemented around the workplace such as switching off electronics including lighting when not in use and avoiding unnecessary printing. Staff should also be encouraged not to leave their devices on stand-by mode. Additionally, if any better deals on internet, insurance or other contracts are available, consider switching suppliers as soon as possible.
Reduce staffing numbers – whilst this should be an absolute last resort, if the business experiences a downturn in work and is not able to support the numbers of employees, then their contracts should be reviewed to see whether they contain any short-time working or lay-off clauses. As we are no longer able to rely on the furlough scheme, this option to reduce working hours must be reflected in the employment contract and any statutory guarantee pay must be calculated and paid to the employee.
Alternatively, if they are not agreeable to working reduced hours and there are no other duties they could perform, you could consider the option of redundancies. This requires strict processes to be followed to avoid the risk of employment tribunal claims, we would therefore suggest that legal advice is taken before any process is commenced to avoid the risk of SOSR unfair dismissal claims.
Support for Employees
What support could be provided to employees to help them through the cost of living crisis?
Financial Incentives – if it is feasible to consider salary increases, this would be a great boost to staff morale when facing the looming energy crisis this winter by making them feel valued and appreciated. However, if it would not be possible to cut into the company profits given the difficulties the company is also up against, it may be best to consider alternatives such as a one-off cost of living bonus. This avoids a permanent increase to operational costs but still shows that employees are valued and the business wants to support them.
Having considered your options, if financial incentives are not viable, businesses could consider performance related bonuses to ensure that output is boosted to support the increased payroll. In the alternative, whilst employees may be penny pinching to save money over the winter months, the company could use tickets and gift certificates instead of bonuses, allowing staff to still attend sporting, cultural or hospitality events.
The company could also obtain corporate discounts for their employees such as transport, gym memberships, cycle to work schemes, or other salary sacrifice arrangements to assist employees to save them money on the items they need or want to purchase. This in turn may have a positive effect on employee wellbeing and morale.
Employee Assistance Programmes – does your business offer a confidential support service to your staff, allowing them to discuss financial, legal or health issues? An Employee Assistance Programme can provide this wide range of support, which is usually available via telephone or online. Employees should be made aware of this support available to them as many packages offer counselling and support services or would assist with relevant referrals.
Income Streaming – whilst a relatively new concept, the purpose of these schemes is to allow employees to access some of the salary which they have already earned within the month before their usual payday. This could help employees to manage their finances better and avoid applying for extortionately high-interest payday loans to bridge the gap until payday comes around.
Flexible working – it is well documented that those who were able to work from home during the pandemic lockdowns were able to save considerably more than they did when working in the office. This allows employees to make savings from not having to do their usual commute, paying for fuel, train tickets, parking or other costs, and avoids those expensive coffees and lunches every day. Over the course of a month, this can all add up to a relatively substantial saving.
However, this must be balanced against the business needs, the wellbeing of the employee working in isolation, and whether the employees would prefer not to be at home given the soaring costs to heat their homes, use appliances and plug in their devices. This may be an option to discuss with employees so they are aware that this flexibility is on offer should they wish to utilise it.
If you have any queries about how your business can take practical steps to prepare for the cost of living increases, please do get in touch with us on 0191 225 0211 or EmploymentDepartment@Samuelphillips.co.uk