Prepare for a rise in demand for employee benefits

The employment market is sailing through unsettling and uncertain times – possibly the most volatile times we’ve seen in nearly 15 years.

Rewind a year and it would have been hard to imagine a more seismic shift in what a ‘normal’ employee market might look like than the one that happened during the near two-year pandemic lockdown.

Unprecedented government support for businesses and workers was announced at a scale – and delivered in a timeframe – never before seen in the UK’s history, and businesses adapted swiftly to accommodate new and more flexible ways of working that would have been more or less unthinkable even a week before the first lockdown began.

It was once-in-a-generation stuff. Or so we thought.

Now, less than two and a half years on from the pandemic’s outbreak, the employee market is changing again, thanks to soaring energy prices, a rapidly unfolding cost-of-living crisis, and a groundswell of employee anxiety over financial security.

What does this mean for HR teams and business leaders? The answer, I think, is two key things:

First, tighter financial controls around business expenditure, investment and growth; second, growing demand for employers to do their bit to financially insulate their employees from the worst of the squeeze on the economy.

This creates a conflict which, if mishandled, risks eroding the goodwill and mutual trust that all businesses require to be agile, adaptable, inclusive, productive, and profitable.

There is now a good deal of evidence – both unequivocal and anecdotal – to suggest that employers are facing increasing demand from employees to fund real-terms cost of living salary increases that will help them to survive the short-term economic rollercoaster.

The ongoing industrial action by rail and postal workers over pay and conditions represents a scale of union revolt that we haven’t seen since the public sector workers’ strikes of 2011. There is also now a near certainty that teachers will strike over pay before the year is out.

Whilst this industrial action is generally the preserve of the highly unionised public sector, disaffection in the private, but similarly unionised, manufacturing sector also risks seeing businesses lose high numbers of working days and associated revenues in the same way.

In white collar industries strikes are unlikely, but discontent can also be damaging on businesses that fail to manage employee wellbeing appropriately.

At the same time, a new report by the Bupa Wellbeing Index published towards the end of September also shows employees putting pressure on their employers to improve key staff benefits like health insurance and pension contributions to safeguard their financial and health futures.

Disillusioned employees are more likely to work to the terms of their contracts, be disinclined to go the extra mile that’s often the difference between success and stagnation, and more tempted to look for better-rewarded opportunities elsewhere.

The dichotomy of prudence over proactivity

Most businesses will now be revisiting their financial plans and budgets to assess what needs to be done to survive a (currently) worst-case scenario of inflation hitting 13% and interest rates climbing to 7% or above.

In most cases this could involve a number of measures that may include putting limits on investment and spend, reducing headcount, finding operational efficiencies, and more.

But placing a business on a financial war footing in this way is often at odds with the mood of employees who fear for their financial future and might be inclined not only to review their contribution to their employer’s past successes, but also decide that contribution deserves to be rewarded at a higher level.

How to manage employee expectation in tough times

Just because employees are understandably spooked by the volatile nature of their economic reality doesn’t mean employers have an obligation to provide financial or benefits-related respite.

However, a ‘take it or leave it’ response to requests for improved terms does little to foster the kind of relationships that have already been built and which will be needed once we sail into calmer waters – which history insists we will do at some future point.

As always, communication is key in all employee relations, and ensuring you or your HR teams are in tune with the mood and feeling of your organisation is essential in managing how you engage with your staff in a way that protects your commercial priorities but also acknowledges their fears.

If there is evidence of overwhelming demand for improved pay and/or benefits, then you will need to have a clear and transparent response to meet it. Helping your employees to understand the business objectives and also the context of the limitations it also faces in uncertain times is usually a good idea.

Take the opportunity to speak to employees frequently – informally at the coffee machine as well as formally in weekly or other regular reviews to not only get a sense of how they’re feeling, but also to underline and reinforce the positive ways in which they are supported and nurtured at work.

Find ways to come together as teams or in larger groups and to share successes, celebrate good work, and champion the values and benefits of your organisation.

Also, it may be worth reviewing any employee benefits you currently provide and exploring whether there are other, cost-effective or cost-neutral ways in which you can provide additional support that could be of value.

If you do carry out a review like this, it may well be worth being proactive and communicating the process to your staff and sharing the findings – even if the net result is that no further benefits will be launched.

At least your teams will know that process has taken place and their needs have been considered.

If you’d like to find out more about how Constantia Consulting can help your business manage employee expectations around rewards and benefits, please get in touch – we’d love to talk to you.