10 ways employee benefits can help with the cost of living

The cost of living crisis has brought the issue of employee benefits into sharper focus than ever before.

A record number of households have seen the largest fall in real-term income since the 1970s, creating an epidemic of finance-related anxiety.

According to the Chartered Institute of Personal Development (CIPD), one in four employees say money worries impact their ability to do their job, while the Centre for Economics and Business Research (CEBR) found that 13 million working days a year are being lost because of employees’ poor financial wellbeing.

Absenteeism and reduced productivity caused by money worries costs British businesses an estimated £6.2 billion a year.

There are ways that employers can help ease the burden on their staff, improving their financial wellbeing and, in turn, their happiness and productivity. We take a look at some of the ways that employers can support their staff with the cost of living through employee benefits.

• Pay a real living wage
• Salary exchange pensions
• Other salary exchange schemes
• Health cash plans
• Financial wellbeing education
• Mental health support
• Group income protection
• Retail discounts and membership schemes
• Emergency funds and crisis loans
• Sell back unused annual leave

1. Pay a real living wage

Low income households have been hardest hit by high inflation, mainly because they spend a larger proportion of their income on food and energy bills, and have less capacity to absorb higher costs overall.

UK charity Crisis found that low-income renters in most parts of England could be forced to miss the equivalent of at least one day of both food and heating a week to keep a roof over their heads.

The most obvious way to alleviate the cost of living crisis is with pay – either by paying a real living wage or with salary increases. Although, businesses are not immune to the rise in cost of fuel and energy, and so salary increases may not be feasible.

The real living wage, which is higher than the mandatory national minimum wage, is an independently agreed amount based on what people really need to earn to live on. Paid voluntarily by nearly 10,000 UK employers, the number of accredited living wage employers has almost doubled since the start of the Covid-19 pandemic.

2. Salary exchange pensions

Employers can offer staff a salary exchange pension, sometimes called a salary sacrifice pension.

A form of workplace pension, all deductions are taken from the employee’s gross pay, rather than their net pay. By taking pension contributions from an employee’s gross pay, their take home pay can increase, or their pension contributions can increase, as they pay less National Insurance (NI).

The employer also benefits as they do not pay NI on the salary that has been paid into the pension pot. Employers can choose to either keep this saving or pass it onto the employee through their pension contribution.

To be eligible, pension deductions cannot lower an employee’s salary to below the national minimum wage. In addition, employees who would fall under the threshold for paying NI if they were in a salary sacrifice scheme should be enrolled on a relief-at-source pension instead, as not making NI contributions will affect how much State Pension they are entitled to.

3. Other salary exchange schemes

Salary exchange schemes can be used for other non-cash benefits as an efficient way of increasing take home pay. Things like childcare vouchers, or purchasing a bicycle through a cycle to work scheme can also be paid for by salary sacrifice. The reduced salary is used to calculate the amount of NI and income tax that the employee pays.

The employer also benefits by reducing the amount of NI they pay, as well as providing employees with the means to reduce their commuting or childcare costs.

4. Health cash plans

Health cash plans assist with the cost of prescriptions, dental, and eye care, from as little as £4.33 per month per employee.

As well as gaining cashback on medical expenses, employees have access to telephone helplines for financial, legal, and mental health support.

This can help alleviate the costs of healthcare that employees may otherwise forego as non-essential spend and can help reduce staff sickness absence.

Read our full guide to health cash plans.

5. Financial wellbeing education

The financial wellbeing of employees is increasingly becoming a concern for employers, as it can have a serious impact on mental health. Employers can help staff manage their finances by providing training and education on financial wellbeing topics.

There’s a fine line between intruding in employees’ private lives and providing the help they may require, but it can be done by fostering an environment where everyone knows where they can go for support.

Managers can support employees by creating an open dialogue and highlighting what benefits may be available.

Awareness sessions can be held on:

• what financial support for employees exists;
• how best to budget;
• managing debt
• financial safety nets;
• the long-term importance of paying into a pension.

6. Mental health support

As well as offering mental health support for any employee experiencing finance-related anxiety, employers can sign up to an employee assistance programme.

Mental health, combined with musculoskeletal injuries, make up more than 40% of all sickness absences, and an Early Intervention Scheme can provide fast-track access to counselling services without a GP referral. Many group life insurance and group income protection policies include employee assistance programmes as part of the policy.

It’s important to make sure that employees are aware of the services available to them and how to use them to get the full benefit.

7. Group income protection

In times of financial crisis, concerns over the security of an employee’s income can exacerbate their sense of anxiety.

Group Income Protection (GIP) insurance, paid for by the employer, provides employees with peace of mind that a percentage of their salary will still be paid if they are off work because of illness or injury.

GIP provides a range of additional services to support your employees including rehabilitation services, such as counselling or physiotherapy, and can also provide partial benefits if an employee returns to work on a part-time basis.

Group Critical Illness cover pays a lump sum to an employee should they, or their immediate family (if included), be diagnosed with a critical illness such as cancer, heart attack, or stroke.

Whilst you would hope that your employees won’t need to make a claim on either of these policies, knowing that they are in place can give employees peace of mind and help to alleviate financial anxiety.

8. Retail discounts and membership schemes

Retail discounts and membership schemes are a great way of helping employees’ money go further and supporting the local economy.

Some companies canvass local businesses to offer their services cheaper in the hope of attracting more customers, while companies like Reward Gateway and Perkbox provide tailor made packages to businesses offering discounts for a wide range of shops and services. Whatever you decide to introduce, it may be worth canvassing your employees first to find out what discounts and schemes they would benefit from most before committing to anything.

9. Emergency funds and crisis loans

Some employers choose to offer this service directly and have set up emergency funds and interest-free crisis loans to employees in dire straits. The aim of such services is to help employees avoid using expensive pay-day loans.

It’s important that such initiatives are complemented by financial education to avoid simply pushing problems further down the line, though.

10. Sell back unused annual leave

Many employers are choosing to give staff the option of receiving money for any unused annual leave, as an alternative to carrying it over to the following year.

While employees should be encouraged to take their annual leave, receiving extra income from a few days they have not taken could be a significant help.

To discuss how employee benefits can benefit your business, or to review your company pension, contact our team on 01603 967967.