Over the past few weeks, we’ve had a lot of business owners ask how they can best help their teams through the cost of living crisis. This article contains some ideas from the best brains at Wow on how you can help.

What is the cost of living crisis?

The ‘cost of living crisis’ is the fall in disposable income experienced in the UK since the end of 2021, caused by a range of factors, including:

  • Inflation rising faster than wage increases
  • New taxes introduced from April 2022
  • Dramatic increase in energy costs
  • Energy price cap raised from April 2022
  • Rising interest rates increasing cost of borrowing

The Resolution Foundation estimates that an extra 1.3 million people will fall
into absolute poverty in 2023, including 500,000 children. This will be the first time ever there has been a rise in absolute poverty in Britain outside of a recession.

As business owners, we don’t know who or how people in our teams or in our wider community will be affected. Many business owners are wondering what we can do to help.

How can we help?

Firstly, even Martin Lewis, founder of moneysavingexpert.com says he is “virtually out of tools” to help people with the cost of living crisis. If he can’t help, the odds aren’t stacked in our favour - but there are some options to consider that may help.

  1. The obvious one: (sustainable) pay increases
    With inflation forecast to average 9% this year, it’s unrealistic to expect that small businesses can increase wages in line with inflation, especially as any pay rises will be weighed down by the 1.25% tax increase. However, it may be possible to bring forward pay reviews and do what we can. Any increases need to be sustainable and shouldn’t risk the future of the business, so think about increasing your prices immediately.
  2. One-off bonuses
    If you can’t afford pay increases, one-off bonuses may be a way that you can help your team this year.
  3. Put pension contributions on hold
    Definitely not ideal, but as a last resort an employee can choose to lower their pension contributions on a temporary basis. Employers still need to contribute the statutory amounts regardless, so you’re not pausing all future planning.
  4. Salary sacrifice schemes and interest-free loans
    With the increase in National Insurance, salary sacrifice schemes could be sensible to consider. These schemes can be used for additional holiday purchase, electric cars and bicycles. Interest-free loans are another option you may want to offer.
  5. Altering work patterns
    Different people in your team will face different impacts which may influence what they need. If some people are concerned about rising utility costs, they may prefer to be more office based. Others may benefit from remote working because this cuts down on commuting costs.
  6. Claim tax relief for working from home
    If your team work from home - even partially - or if it is now in their contract that they are remote workers, they can claim tax relief from HMRC on working from home expenses. The remote workers can also claim travel expenses for when they do come into the office.
  7. Check you’re not paying too much tax
    You can check you’re not paying too much tax through your tax code (the one on your payslip) on this HMRC page. You can check previous years codes in case tax has been overpaid for the previous four years.
  8. Marriage allowance transfer
    If you are a basic rate tax payer and your partner pays no or low tax, you may qualify for the Marriage Allowance which lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. This reduces their tax by up to £252 in the tax year (6 April to 5 April the next year). You can apply online and back date to 2017.
  9. Signpost access to advice
    Mortgage advice, financial planning and debt management counselling services will possibly be in high demand. As an employer you could find an arrangement to offer this advice to your team.
Communicating with your team

In the meantime we recommend communicating with your team to provide reassurance and let them know you are looking at what you can do to support them. Make sure that your team know to come and talk to you if they have any financial concerns.

Wow clients have access to our ‘Friend in Need’ employee assistance program. Feel free to share the details of this program with your team.

What will really make a difference

As Martin Lewis said, implementing these measures may help, but what’s really needed is political intervention. Protests in Spain have led to a significant package of government support, including a tighter cap on energy prices and requiring the oil companies to contribute. The French government has implemented a 4% cap on energy prices. We believe that businesses can be a force for good, perhaps now is the time for our voices to be heard.

Finally

If there’s anything you think can be added to this list of measures or anything we can do to help at Wow, please ask. 

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