Improving employee happiness

High inflation has led to a cost-of-living crisis and strike action by groups of employees demanding pay rises in line with inflation. Strikes are less common in smaller businesses, but their employees will also be feeling the pinch and the temptation of higher wages elsewhere. What can you do to help?

Financial stress often leads to lower job satisfaction, but increasing employee pay in line with inflation may be unaffordable for many businesses. Raising prices to cover increased salaries is also unlikely to be possible because the cost-of-living crisis may also be having an impact on sales.

Unhappy employees are also more likely to leave, a trend that has grown since early 2021 in the wake of the pandemic and has been dubbed the ‘great resignation’ or ‘quiet quitting’.

But there are steps employers can take to help bridge the gap between an affordable pay rise and the inflation rate.

  • Inflation is predicted to fall. A one-off payment could help staff cope with immediate financial pressures without committing a business to higher longer-term salary bills.
  • Linking pay more closely to performance means that a salary rise at least partly pays for itself by increasing business income.
  • Education about budgeting and financial decision making helps employees make their money go further and understand the longer-term consequences of potential money-saving moves. For example, cancelling pension contributions is likely to reduce income after retirement, and cutting spending on medical care such as dentist and optician services could give rise to health problems later.
  • Employers could even provide additional benefits in kind that they can access more cheaply than individual employees, for example gym membership or discounted goods and services.
  • Likewise a business may be able to provide medical insurance for employees at a lower cost than employees taking out their own policies. There are also business benefits: side-stepping dependence on the NHS could reduce delays in obtaining treatment, keeping employees healthier and shortening sickness absences.
  • Setting up a cycle-to-work scheme gives employees the chance to save public transport costs and may provide a tax advantage depending on how it is set up. It also gives rise to potential health benefits for employees.
  • Meals in a staff canteen, a mobile phone and some forms of childcare support are valuable tax-free benefits for employees where it is feasible for these to be provided.

Flexible work patterns

Many employee benefits are taxable, but there are some non-financial benefits that can promote employee wellbeing and retention. Flexible working and home working have grown in popularity especially since the Covid-19 lockdowns. Such practices make it easier for employees to manage childcare and other responsibilities and improve work–life balance. Working at home also reduces commuting costs. A Bill currently going through Parliament will enhance the right of employees and other workers to request flexible working. Employees will be able to request flexible working from day one instead of the current 26 weeks’ service requirement and will be able to make two requests in any 12-month period rather than one. Employers will have to consult with an employee before rejecting their request. However employers will still be able to reject a request on one of eight business grounds. A separate Bill will give workers the right to request a predictable working pattern.