Conversations around cost of living concerns are making their way into the workplace as people look to their employers for support. A number of big name companies have announced an array of financial initiatives to help employees combat one of biggest income squeezes on record.

A general review

Employee needs have changed. As such, an incentive and reward package that worked a decade ago might not cut it today. It may be an opportune time for a compensation and benefits review to optimise the current offering based on what really matters to employees right now.

Indeed, with money worries at the forefront of many people’s minds, a recent survey in HR Magazine found overtime to be the most in-demand work perk, followed by flexible working hours and company-funded retirement plans.

From a legal perspective, it’s important to make sure that any benefits that might be changed aren’t part of an employee’s contract of employment. If they are, employers need to consult staff to get their agreement before making those changes. 

Changing benefits is one matter, looking at changing pay in response to a rise in cost of living is another consideration altogether. 

If a salary raise is the answer, then it must be approached on a basis that it can be sustained in the long term. And it must also be awarded on a scientific basis – meaning that there must be some thought and objective criteria that determine the extent of the raise. 

Perhaps something more sustainable would be the consideration of bringing pay reviews forward. Thought should be given to awarding an annual pay rise six months early to ease the burden over the winter months.

One-off bonus payments

Some employers are looking to pay a one-off bonus payment to provide temporary financial relief. 

The problem is that in some cases, this is being done as a knee-jerk reaction and is symbolic only. While employers want to be seen to be doing ‘something’ and have considered one-off bonuses as a way of doing this, it risks setting an annual expectation.

From a legal point of view, a one-off bonus payment should not ordinarily give rise to any future entitlement to bonus payments, so long as it is completely discretionary. If, however, there becomes a history or pattern of making such payments, the element of discretion may be lost.

Hardship loans

Employers can loan employees up to £10,000 each year with no tax consequences. However, those considering offering hardship loans should ask the employee to sign a loan agreement before making any payment, setting out the terms of the repayment, including repayment terms, authorisations for deductions from salary for repayments, repayment if they leave, and sanctions if the loan isn’t repaid.

These technicalities aside, the main question is whether hardship loans are a good idea. Loaning money to employees won’t necessarily solve the problem and could lead an employee into further debt. Furthermore, employers rarely do a ‘credit check’ when lending money. What if the employee has no means of paying the loan back? Does this lead to disciplinary action? Employers should not forget they are not banks.

Additionally, some are paying hardship loans with no expectation that the employees pay them back. This main issue here is to ensure fairness in the process of awarding loans and determining the amount. How can an employer judge the ‘need’ of one employee compared with another? This is incredibly subjective and risks opening the possibility of discrimination claims.

Consider the optics

If an employer is not in a position to consider financial bonuses, it may want to look to provide food or other items to help staff who are struggling. Indeed, a growing number of businesses have started providing free meals at work as part their employee benefits package. One BT call centre set up a ‘community pantry’ where staff can donate and pick up essentials such as dried pasta, cereal, and baby food. 

While some will appreciate these sorts of perks, it’s important to be mindful that others may be uncomfortable with the idea – BT was criticised for “normalising in work-poverty”. Moreover, those who are facing financial hardship will likely not want their colleagues to know that they are struggling; this could lead to grievances and possible reputational damage, as well as questions whether staff are being fairly paid.

Beware of discrimination

As with any benefits scheme, it’s important to consider if cost of living incentives may give rise to complaints of discrimination. For example, John Lewis’ free meal scheme is a great perk. 

However, depending on the food on offer, not all employees may be able to benefit. If the John Lewis canteen menu doesn’t cater for Kosher or Halal diets, for example, it may exclude some from that perk.

Furthermore, benefits that are only provided to certain roles could also give rise to complaints of discrimination unless there is an objective justification for it. 

Simple solutions may put money in people’s pockets without great cost to employers and they can have financial and other benefits for businesses too. That said, care must be taken in their use and implementation.