The cost of living in the UK has been increasing since 2021 and inflation reached its highest recorded level since 1992 in February this year.
The rate of inflation is predicted to keep rising and reach a peak in the final few months of 2022.
It is no doubt that increasing pay for employees is a challenge; businesses and employers face a battle with battling rising costs and factors such as spiralling energy costs.
It’s important that businesses know how to handle pay reviews, pay rise requests, and ensure competitive wages for staff retention.
A new record number of payrolled employees
According to the latest ONS Labour Marker Statistics, there is a new record number of payrolled employees (up 35,000 to 29.6 million).
Commenting on this, Aspire founder and chairman, Paul Farrer says:
“The jobs market remains in a state of high demand for talent, with more people working and even fewer unemployed. This data also shows that while the rate of growth in new jobs is slowing, it has hit yet another record high, which is little comfort to employers fighting over the small pool of available candidates.
“The very fact that there are more job vacancies than ever – while good news for candidates – tells you everything you need to know about the difficulty businesses are having when it comes to hiring the skills they desperately need.
“It’s also clear that the increased cost of living has eroded pay rises, bringing new headaches for employers who, as well as recruiting, need to retain the staff they have. However, upward pressure on wages is inevitable and is evidenced in the creative, technology, sales and events industries, where we’re noticing that salaries are actually increasing as employers compete for talent.”
Hannah Copeland, HR Business Partner at employment law and HR support firm WorkNest:
“Whilst competitive wages are undoubtedly up there when it comes to engaging and retaining good people, it may not always be practicable for employers to keep up with inflation.
“However, employers and HR departments have a key role to play in helping employees and there are other things businesses can do to try and ensure money is less of an issue.
“Employee Assistance Programmes (EAPs) are a key investment for many businesses. These are somewhere that employees can go to get support in a huge variety of areas such as mortgage advice, financial planning, debt management alongside many other unrelated issues.
“Many EAPs will also supply counselling for employees which tackle the emotional challenges of managing finances. EAPs are commonly supplied by a third-party supplier but businesses will be instrumental in setting the scheme up and making sure it offers services which are valuable to employees.
“Employers must be also open and transparent when it comes to pay reviews. Even if the review doesn’t lead to a pay rise, then it is vital that this is communicated and some thought has gone in to looking at salaries and considering whether a pay rise could be applied.
“Yearly pay reviews are recommended unless your business operates performance related pay, in which case, individual objectives can be linked directly to business performance. In this situation, employees become more able to control their income based on what they deliver. Companies must not fall into a trap of offering pay rises based on individual needs. There should be clear structure surrounding pay and promotion.
“Employers may feel more able to consider whether they can support individuals financially on the basis of their broader benefits offering. Flexibility here is key and HR expertise is capable of helping companies to understand whether there is scope in the business to offer things like interest free loans for buying season tickets for travel or creating tax savings through salary sacrifice schemes.
“There may also be schemes that already exist within the business which employees don’t know about such as shopping discount schemes. HR has an important role here in communicating what is available and encouraging maximum uptake.”