Inflation has hit a 30-year-high, and employers will have to engage in the taboo of talking about finances at work if they want to support and retain their talent.
The cost of living crisis is dominating the discourse, and employers must consider the mental health impact on their workforce. Otherwise, they risk productivity lulls and attrition as talent looks for employers that pay a better wage or offer greater support.
The risks of ignoring inflation in the workplace
After increasing in 2021, the Bank of England forecasted inflation to peak at 7.25% in April 2022. So here we are, with workers facing rising fuel, energy and food costs with pre-inflation salaries and firms risking losing talent in a healthy jobs market.
In all, it’s a perfect storm for a dissatisfied, disengaged, and distracted workforce if employers don’t actively engage with the challenges inflation has brought to employees.
While inflation has stalled wage growth in early 2022, marking the third time for workers in around a decade following the global financial crisis and the EU referendum, workers now have a healthy jobs market, but this won’t necessarily mean getting the salaries they want.
As a result, employers, if not financially able to offer better wages, have to offer other things to improve employee wellbeing and retention during the inflation period, such as greater job flexibility, mental wellbeing support, and help with financial wellness.
Mental health – and affected groups
Finances and mental health are deeply linked; if an employee’s finances are in trouble, their mental health is likely affected, having a knock-on effect on productivity. Similarly, if an employee’s mental health is poor, this could worsen their finances.
All groups are likely to feel affected by inflation both mentally and economically, but employers shouldn’t forget about the particular pressures women and working parents might be facing.
Like with pay equity generally, women have found themselves on the back foot in the inflation period. According to research from CIPHR’s new pay rise study, of respondents who received a pay rise this year, 40% of women said it was below inflation compared to 32% of men, with more women reporting a lower pay rise generally.
Working parents, especially single parents, could also face intense economic pressures during inflation. Faced with the financial responsibilities of childcare, such as food, clothing, medicines and possibly daycare, this cohort, already pressured by high childcare costs, may not be able to afford to go to work, especially if they are hybrid or office-based.
What employers can do to help
Offering employees flexible working options is a good start to combat declining mental health and productivity during inflation.
Hybrid organisations could send the message that staff aren’t expected to attend the office and pay commuting costs as inflation peaks. Managers and colleagues should also be mindful of not insisting on office-based meetings.
This could be communicated as a ‘no pressure’ policy and may well alleviate the stress of employees who are struggling financially but feel compelled to adhere to hybrid or office-based working policies.
Just sending the message that the organisation is aware of the situation could make employees feel cared about, which is an incentive to stay. However, if leaders ignore the financial realities of inflation and its effect on employees, some may look for other roles that offer more flexibility that suit their financial needs.
With a buoyant jobs market, employees under financial pressure could find roles that pay more. Budget permitting, if firms want to avoid a talent drain, unfilled roles, and remaining overworked staff, they might want to consider conducting salary reviews with their high performing employees on a more regular basis this year.
The importance of financial wellbeing policies
Financial wellbeing has been a less-discussed aspect of workplace support for too long. But the current living crisis has brought it to the fore. According to the Money and Pensions Service, 4.2 million workers’ days are lost in absences related to a lack of financial wellbeing each year.
Furthermore, when they come to work, employees with financial concerns bring their troubles, with almost eight in ten UK employees finding it affects their performance. With this year’s inflation issues added to the mix, it has never been more important for employers to talk about financial wellbeing with their employees.
Providing online resources for financial advice is one way to help, including showing staff where they can access budgeting and debt advice and even tax education-related tools.
While a comprehensive benefits package can help staff get the most out of their salaries, such as including mental and physical health insurance and even gym memberships which could be lifelines during this stressful period, ensuring HR and management are competent in supporting staff with financial advice and able to answer questions they have is also key.
The effects of inflation are real and serious for everyone, including businesses and employees. Once seen as private and even taboo topics, finances, including salaries and how far they can stretch, are now front of mind for everyone in the workplace. How can employers brush the conversation under the carpet any longer?