How to support your employees through the cost of living crisis
How can businesses manage the rate of inflation?
As the cost of living surges across the globe, companies and their employees face huge financial obstacles. Inflation is soaring, increasing the price of energy, public transport, petrol, food, and basic living necessities.
While some countries are seeing a more destructive economic impact than others, inflation has become a global problem. In 44% of countries classified as advanced economies, 12-month inflation through December 2021 was over 5% — a sudden escalation that has not been seen in more than two decades. Emerging markets and developing economies have experienced a similar impact, with 72% of EMDEs having also been confronted with annual inflation rates above 5%.
While governments insist the inflation rates are a temporary side effect of current cataclysmic events — the Covid-19 pandemic, the war in Ukraine, and economic sanctions on Russia — the surge has caused major concern for businesses and their workers, who are faced with costly expenses and psychological burnout.
What’s contributing to the rise in cost of living?
The high rate of inflation is driven by events disrupting global economies. The Russian invasion of Ukraine (and subsequent sanctions) have caused huge economic turmoil. Both Russia and Ukraine supply vital raw materials to the rest of the world, including energy, metals, and agricultural products. With so many countries reliant on these basic materials, the war has sent oil prices and other living costs surging.
According to the US Department of Agriculture, Russian and Ukrainian wheat exports make up more than a quarter of the global total. Europe relies on Russia for 40% of its natural gas supply, and high volumes of other commodities like gold, aluminium, and steel are also produced or mined in Russia. Restrictions on these goods are causing major disruption to global supply chains and increasing demand for materials that are no longer readily available.
The post-pandemic resurgence has also increased global inflation as countries fight to repair the financial damage inflicted by Covid-19. HGV driver shortages have caused huge supply chain issues, while increased tax payments have made many people tighten their purse strings.
In the UK alone, inflation has risen to 7% — the highest rate in 30 years. In addition to the pandemic and the war in Ukraine, UK residents are also struggling with the ongoing effects of Brexit. As the country continues to experience supply chain issues with the EU, residents have seen the largest monthly rise in petrol prices since records began in 1990. Household fuel bills have risen from an average of £1,277 to £1,971 per year, rail fares have increased by up to 3.8%, and higher interest rates continue to make mortgage payments more expensive for homeowners.
Where is this happening?
But it’s not just wealthy countries like the UK and the US (which have seen the fastest rise in inflation since 1982) that are affected. Emerging economies are also feeling the effects of these global price rises.
In Pakistan, inflation rates are even higher, reaching a staggering 13% in January 2022. As the rupee plummets in value, food, electricity, and fuel prices have skyrocketed, leaving people struggling to cope with the rising cost of living — particularly those on lower incomes.
Meanwhile, Mexico has seen inflation hit a 21-year high. Mexico’s central bank has raised interest rates to 7.75% — a rise of 300 points in the last year — in an effort to minimise inflation. Mexico’s response is in line with moves made by the US central banking system to curb its own cost of living crisis.
As globalisation continues, international economies are increasingly intertwined — so few countries are protected from the global cost of living crisis. The surge in job vacancies and fears of a global recession are further adding fuel to the fire.
What will it mean for workers and employers?
The repercussions for workers are already visible in stagnating economies around the world. With less disposable income due to rising energy bills, food prices, and increased interest rates on credit cards and loans, people are spending less, causing the economy to grind to a halt.
More people are also experiencing in-work poverty. In-work poverty happens when a working individual earns less than the cost of living. More people are turning to food banks and government schemes to support themselves if they can’t pay for essential items — staff at some UK universities have even requested food banks to help them deal with rising food prices.
Financial worries have been linked to depression and other mental health issues, so businesses may find more staff taking time off to deal with their mental health, leading to staff shortages. Morale and productivity may also take a hit as people struggle to cope with increased workloads and money worries. Workers who feel underpaid and/or undervalued might seek work elsewhere — the Great Resignation has already set a precedent for this.
But staff problems aren’t the only impacts on businesses. With rising rates of in-work poverty, fewer people are spending money on non-essentials, leading to reduced revenue. Supermarkets have already reported customers asking cashiers to cap their spending limit.
With profitability and staff wellbeing on the line, businesses have a responsibility to find ways to help their employees cope with the ongoing cost of living crisis.
How to support staff through the cost of living crisis
Business owners and HR managers must work to understand how inflation is affecting your region. While most countries around the world are affected by rising prices, this may impact your staff differently depending on where they live. This is especially important if you have employees based in different locations around the world.
Once you understand how inflation is impacting your employees, you can implement initiatives and policies to support them.
- Cost of living pay rises — if your business can afford to, increase staff pay in line with the cost of living. This will ensure they can comfortably afford the basics they need
- Find creative ways to help staff save money — reinstating work-from-home practices can help staff save money on their commute
- Implement financial wellbeing policies — offer your staff training and information to help them better manage their money. If you’re not sure where to start, consider asking employment policy experts how to create a financial wellbeing policy for your organisation
- Benchmark your employee salaries — find out if you’re paying your staff a fair wage for their role and location with salary benchmarking. Mauve offers salary benchmarking as part of our value-added services.
Other ways to support your staff
- Offer mental health support and wellbeing checks — train mental health first aiders and ensure staff can spot and deal with a mental health crisis, as well as know how to seek mental health support.
- Be transparent about company plans — where possible, try to allay fears of job losses and redundancies
- Help staff progress in their jobs — even if you’re not in a position to promote people right now, offering training and progression paths boosts morale and shows staff you’re invested in their future.
Get help with supporting staff through a cost of living crisis
It’s not easy for businesses to support staff through times of financial uncertainty. But employment solutions experts like Mauve can provide the advice and guidance you need to implement policies that benefit both your business and your employees.
We help businesses take care of teams all over the world. Find out more about how Mauve’s employment consultancy services can help you support your staff and protect your business through the cost of living crisis.