The UK has been experiencing a cost-of-living crisis ever since late 2021. The situation has seen the price of everyday essentials such as food and bills increase significantly quicker than the average household income. It is particularly severe for low-income communities, who often face the brunt of economic disparities.
It remains to be seen how the National Living and Minimum Wage (NMW), which is set to rise in April 2024, will affect this.
You can CLICK HERE to get a deeper dive into the NMW in our previous blog.
What does the Cost-of-Living Crisis Mean for Employers?
The cost-of-living crisis not only impacts individuals but businesses too, particularly small business owners. Rising prices are hitting both their personal and business budgets. There is also the very real possibility that trade could drop off if people stop spending. This is a common effect of high inflation.
With the increase of the NMW in April, organisations may see a significant increase in their wage bill and may not have the funds to pay their employee’s wages. This could result in a host of negative ramifications. Businesses may be forced to cut back on hours, hire fewer workers, or increase the cost of their products and services.
Possible Redundancy
Business owners will not be able to make employees redundant on the basis that they cannot afford the increase in their NMW rate. Since it is a statutory right, employees should not face a detriment as a result. If a worker was made redundant because of this, it could give rise to an unfair dismissal claim.
This situation may result in businesses closing their doors completely.
How can Employers Mitigate the Impact of the Cost-of-Living Crisis?
There are ways that companies can combat the cost-of-living crisis, however. Managing your costs in ways that don’t result in tribunal claims is essential. Performance is one area that could be a focus point as underperformance can have serious negative impacts on a business and its finances. If employees are not working to the standards you require, now is the time to investigate why and act accordingly. Keeping on top of sickness absences and making sure return-to-work meetings are carried out is also crucial.
Temporary employment could also be a consideration to cover seasonal fluctuations and work-intensive projects. Having 20% of an organisation’s staff working on a temporary basis perhaps allows for more flexible workforce arrangements that can supply the manpower to meet the duration a company requires. Temporary workers are also paid strictly for the hours they’ve worked.
It may also be wise for firms to boost morale among staff. Remote and hybrid working options could reduce commuting costs for employees (click here to find out how hybrid working has impacted the workplace). Promoting mental and financial wellbeing programs focused on cost-of-living issues could also be an option for employers.
