2023 saw a rise in costs impacting both businesses and consumers. Some people have responded to this by picking up extra work and side hustles to boost their income to pay higher mortgage repayments and rents. There has also been a rise in the number of people who are working who are struggling to find housing, particularly in areas where housing costs are higher, and those who are in work may find themselves effectively homeless, for example couch-surfing at friends’ homes (so called “hidden homelessness”) or having to use foodbanks. ‘In-work’ poverty has continued to rise. Government data in 2023 showed that for those in full time work, the numbers facing homelessness at the end of 2022 increased by 22% compared to the same period two years ago.
The question is, what are employers’ obligations towards staff in this circumstance?
In terms of legal obligations, employers are required to pay at least the relevant national minimum wage, which varies depending on age and whether or not the individual is an apprentice. There is no legal obligation to pay more than that, but employers will usually pay at least market rate to attract the right employees for their business and the particular roles. Clearly, employees with serious financial worries and difficulties are less likely to work productively and are more likely to experience mental health difficulties. At the height of the cost of living crisis some employers were for example offering one-off payments, rather than salary increases to help mitigate this. Other employer assistance ranges from improved employee discounts to free food, or for employers who have the cashflow or resources to offer these, employee loans or advances of wages and running weekly rather than monthly payrolls; or employers using schemes such as Moneyworks Wales, which offers savings and loan services deducted from employees’ salaries, provided by not-for-profit credit unions. The Financial Conduct Authority has highlighted the risks, for both employees and employers, of using some salary advance schemes. It has particularly raised concerns surrounding the fact that this type of activity is currently unregulated.
Offering flexible working so that employees can avoid travelling during peak times when public transport fares may be more expensive, offering home working, or different start and finish times to work around childcare can assist if these are feasible for the employer and don’t negatively impact productivity. This may be a better alternative than the employee simply concluding there isn’t much financial incentive to continue in the job due to cost of childcare, particularly in sectors where it is more difficult to recruit and where wages are typically lower, such as in care, retail and hospitality.
Employees may be resistant to taking on additional hours or overtime believing this may reduce their state benefits. While Universal Credit payments do reduce as individuals earn more, contrary to popular belief, Universal Credit does not stop once the individual works for more than 16 hours. For every £1 earned the payment goes down by 55p.
Whether employees can take on additional employment with another employer will depend on the terms of the employment contract. Some employers for example may require their employees to obtain their authorisation, so the employer can be satisfied the additional employment won’t interfere with their main job, or that they are not for example working for a competitor and where this could create a risk for the employer.
For further guidance, you can visit the employee engagement and wellbeing resources in the employment section of the FSB Legal and Business hub.
Employers can also signpost employees who are experiencing financial pressures to organisations that provide advice and support, such as The Money and Pension Service: https://maps.org.uk/en/work-with-us/financial-wellbeing-in-the-workplace/cost-of-living-money-guide-for-employers. Organisations such as Step Change and the Government’s MoneyHelper can assist individuals with debt management.