Times are tough. The impact of the cost-of-living crisis and rising inflation rates on lower income households is well-documented – and rightly so. This year, the poorest half of UK households had living standards 20% below those of 2019-2020. In 2023, 7.3 million households had to make a sacrifice on an essential such as prescription medicine or hot water. 

That said, lower-income households aren’t the only ones struggling with the economic climate. People earning within the top 10% of UK incomes – that’s salaries over approximately £66.7k – report having little to no money left over at the end of the month. Many are having to choose between affording the present day and saving for the future. 

Equating a high income with being financially secure is a common assumption to make – but it’s just not accurate today. Why is this and what can we, as employers, do about it? 

Let’s take a look. 

Why are higher earners struggling with the cost of living? 

When looking at a household’s financial health, income is only one part of the picture. Different factors impact how much money a household has left over after essentials. 

Generally speaking, parents (particularly single parents), those living alone and those in expensive parts of the country will face higher outgoings than their counterparts on similar salaries. 

These outgoings might include: 

Increased outgoings push many of these households below the minimum income standard, despite their higher salaries. 

These rising costs are restructuring the middle class. A recent report from the abrdn Financial Fairness trust indicates that those in the middle fifth of income distribution have a 1 in 3 chance of moving to the bottom two fifths by next year. There’s a 1 in 10 chance they’ll move to the bottom fifth, most likely below the poverty line. 

Having money available for a rainy day is more necessary than ever – but it’s also harder than ever. So, how can employers help? 

How can employers support employees with the cost of living? 

Employers have a duty to support employees with the cost of living, no matter what their income is. For any business interested in CSR – that’s everyone, then – the responsibility doesn’t stop once salaries are paid and pension contributions are made. 

Here’s how you can help: 

Review compensation packages

Do you pay in line with market rates, and do you offer salary increases in line with inflation? For businesses that can’t afford to give increases, can you give a one-off bonus instead? 

Other financial benefits that help ease the burden on employees include healthcare and insurance, discounted childcare, and discounts on essentials like food. 

Provide financial education 

Making sure that your staff know what to do with their money is just as important as paying them properly. At an absolute minimum, make sure they understand their salary, pensions and any options. 

Offering financial education is a proven way to improve employee’s financial and social wellbeing, too. Make sure you have a good balance between personalised education and generalised education. 

Many companies fall into the trap of thinking that generalised content such as webinars or apps is enough, but that’s often not enough to help an employee. Generic advice allows 14% of people to make a financial decision. Personalised advice – like you’d receive from a financial coach 😉-  pushes this figure up to 75%. 

Give the benefit of choice

All different types of people make up a team. High earners, low earners, parents, single people, part timers, side hustlers…you get the idea. Offering a degree of flexibility when it comes to compensation, so they can make decisions that suit them, can be a very helpful move here. 

For example, do you offer salary sacrifice schemes to help with transport, childcare or wellbeing costs? If you have a high annual leave allowance, is there the option to sell a set number of days? 

Your benefits can be flexible too. Thanks Ben is a great example of a benefit provider that gives employees help in the areas that mean the most to them – without a huge admin headache for the employer. 

Offer flexible working 

Speaking of flexibility, offering the choice to work between the office and home is one of the single most important things you can do to support your team members. Working parents or those with high transportation costs, will benefit hugely from having a choice.

You can also offer flexibility if your business is remote-first. Giving your employees the option to rent a desk at a coworking space, or hiring a room once a week, can ease the burden of high energy bills for those that work from home. 

Focus on mental wellbeing

Financial wellbeing often has a knock-on effect on mental wellbeing at work. 

Many higher-paid jobs feel more insecure than ever – for example, in 2023 the global tech industry saw 240,000 job cuts. If you can, make the steps you’re taking to protect jobs public. 

Make sure you have a strong mental wellbeing strategy, including an Employee Assistance Programme, and make sure your culture contributes to good, rather than bad, mental health. 

A key principle of building financial resilience is to never make assumptions – and to recognise that employees are individuals, not one and the same. Taking this approach is key to a strategy that will support all of your employees; and encourage them to stick with you, to boot. 

Want to learn what personalised financial support looks like in practice? Just head here.

Octopus Money Limited is an appointed representative of Octopus Investments Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England & Wales under No. 14069098.

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