How the cost of living crisis is impacting employee benefits
With the cost of living crisis affecting everything from the obvious (people’s finances) to the less tangible (mental health), more and more companies are refreshing the benefits they offer to employees. We’re taking a deep dive into the impact of the cost of living crisis and how you can adapt your benefits offering to suit your workforce’s changing needs.
The cost of living crisis
The cost of living crisis was coined back in 2021, and it’s something that’s been on everyone’s lips ever since. It refers to the fall in people’s ‘real’ disposable income (in other words, how much money people have to spend after inflation, taxes and benefits). An unfortunate combination of high inflation and low wage growth has meant we’re paying more for everything from food and rent to fuel. Consequently, many people are now unable to afford essential household costs.
The impact on employees – and people in general – is significant. And it’s affecting what kinds of benefits people want to see from their employers. Unsurprisingly, with many people struggling to manage their finances, mental health has taken a hit. Last year, 34% of people felt anxious due to their financial circumstances and 31% were worried about running out of food.
In an ideal world, employers would offer pay rises as a way to combat the effects of the cost of living crisis. But many are unable to do so thanks to falling sales, dismal economic outlooks and rising supplier prices, so it makes sense that they’re turning to employee benefits as an alternative. But what exactly are staff hoping to see from a perks platform these days?
What do employees want?
Mental health benefits
A person’s socioeconomic situation can have a huge impact on their mental health. So it’s no wonder that with rising prices and stagnant salaries, people are feeling the pinch when it comes to both their bank balance and their wellbeing. According to mental health charity Mind, 60% of employees say they’d feel more motivated if their employer took action to support their mental wellbeing. We’re seeing more and more businesses take this onboard, offering benefits like counselling, meditation app subscriptions and subsidised gym memberships. In fact, our global benefits benchmarking survey found that in the last year, there’s been a 14% uplift in the number of employers offering mental health benefits, which is really promising.
Flexibility in general has become a priority for many workers in recent years. But particularly when it comes to your place of work. Even before the cost of living crisis reared its ugly head, the ‘stay at home to stay lives’ initiative triggered by Covid-19 meant more people than ever were working from home. And it looks like this trend is here to stay. Many people now prefer to save money by working from the comfort of their kitchen, instead of forking out for soaring public transport or petrol costs and expensive lunches. So we weren’t all that shocked to read that according to Deloitte, in 2023, 64% of millennials would like to have more flexibility over when and where they work.
Facing money pressures can be stressful, but financial literacy can help to reduce this burden. With 45% of UK adults admitting they don’t feel confident managing their money, this provides an opportunity for employers to step in and help employees make the most of their money and develop healthy spending and saving habits. Octopus Money Coach, for example, offers every employee their own money coach and a plan to create the life they really want – from today, all the way to retirement.
Flexible allowances to spend on essentials
In the last year, we’ve seen a noticeable increase in employees using their flexible allowances to make cost-of-living related purchases. The percentage of employees' flexible budgets spent on cost of living related expenses – like food and bills – doubled between 2021 and 2022. And it’s still on the up. This makes a clear case for the value of flexible benefits, as they cater for changing employee needs during times of economic turbulence. For employers, it’s easy to adjust flexible benefits to accommodate any personal problems an employee might be facing - like financial struggles due to the cost of living crisis.
Overall, 2023 has so far seen an uplift of 9% in the number of employers offering a form of salary sacrifice benefit to employees. Salary sacrifice (or salary exchange) is when employees agree to give up a portion of their salary for additional benefits via their employer, such as transport or childcare discounts. It’s beneficial to employers as they pay less national insurance, indirectly helping them save on employment costs. This could suggest that the cost of living crisis is influencing employers' decisions to seek out more cost-effective employee benefits – whether this trend continues into 2024, it’s too early to tell. Watch this space!
The solution? Flexible employee benefits
Ultimately, people want more control. Research has shown that a sense of control, increasing skills and boosting self-esteem can help to lessen the impact of financial stress on people’s mental health and wellbeing. Which is where flexible benefits provide the perfect solution. With flexible benefits, employees can tailor their package of perks to suit their needs, whether they want to focus on fitness or improving their financial knowledge. For example, with the Ben Mastercard, teams can choose what works for them. They can opt into benefits that catch their eye, be it childcare support or a book buying budget, and track their spending in one place.
How to implement flexible employee benefits
Getting set up with flexible employee benefits is simple. With Ben, you can either add your current list of benefits or choose the ones you like the look of from our marketplace – from pensions to yoga classes and life insurance. If you’re not sure which perks your employees would appreciate, ask them first! Your staff can then choose the benefits they want from what’s available, while you set flexible allowances to prevent overspending. Employees can spend whatever’s leftover with their Ben Mastercard.
Make sure you clearly communicate the process for selecting and using benefits so that everyone’s on the same page. You might want to have an FAQ document with contact details for whoever in HR is responsible for overseeing your benefits platform. Plus, be sure to include your benefits list in your new joiner pack and shout about it on your Careers page and in job descriptions – it could really set you apart from the competition!
To make sure they’re being used effectively, check in with your employees a few months after the new benefits process has been put in place, and regularly going forward. Ask them whether they’re happy with their benefits, if there’s anything they would change about the process or if there are any additional benefits they’d like to have access to. Don’t be afraid to ask for feedback – it’s the best way to make sure you’re providing personalised support and maximum reward to your team.
And that’s it, you’re ready to supercharge your benefits with Ben. Effortless for employers, enjoyable for employees.