The cost of living crisis: What is it and what can your employees do if they’re struggling?
Each year, household bills and items tend to increase slightly. However right now, we are facing some of the biggest increases to bills and taxes in years. From April, energy prices and national insurance are due to rise, and on top of this, Covid-19 hit global supply chains leading to significant price rises for both retailers and consumers. This now means that over the next 6-12 months people will have to cut their spending or, for some, choose between being warm and feeding their families.
What is set to change?
The energy industry has been in turmoil in recent months with prices surging and companies going bust. On 3rd February the energy price cap was announced causing great concern as the cap was lifted by £693 a year. The cap will start on 1st April 2022 and will go through to 31st September 2022 rising by 54% to £1,971 a year. This sharp increase is predicted to have devastating effects to households throughout the country.
Also in April, the rates of National Insurance Contributions are due to increase by 1.25 percentage points, to help tackle backlogs in the NHS caused by the pandemic and reform social care. Here is a breakdown of salaries and what the new national insurance contribution could mean for your employees:
- £20,000 – will pay an extra £130 a year (£10.80 per month)
- £30,000 – will pay an extra £255 a year (£21.25 per month)
- £50,000 – will pay an extra £505 a year (£45.80 per month)
- £80,000 – will pay an extra £880 a year (£73.33 per month)
- £100,000 – will pay an extra £1,130 a year (£94.16 per month)
And, just to add fuel to the fire, inflation is set to hit 7.25% in April, according to new Bank of England forecasts recently released. The prediction would mean that disposable incomes fall by around 2%, according to Bank estimates, the worst impact since records began in 1990.
What help is available?
In a bid to help those households struggling with the cost of living crisis, Chancellor Rishi Sunak has announced people could claim up to £350 to support these increases. This includes:
- a £200 rebate loan in October to all households; and
- a £150 council tax rebate in April to all households in England for those in council tax bands A to D.
Details about the £200 rebate loan are still be finalised, however, the £150 discount on council tax will be applied automatically if eligible, so employees do not have to apply.
Tips to help your employees reduce their outgoings
During this difficult time, there are some tips you could share with your employees to help them reduce their outgoings, and these small changes can make a big difference:
The big switch off
One way employees could save some money is to remember to switch off lights when they’re not using them. Reminding them to not leave a room with a light on, check all lights are off before they leave the house and utilise natural light as much as possible. They could also switch to energy efficient lightbulbs and although the initial cost might be higher, they can help save more in the long run.
Employees should also switch off their appliances when not using them. From their TV, radio and phone charger to their kettle and toaster. When they are not in use, turn them off!
1 degree cooler
According to uSwitch, turning down a thermostat by just one degree, could save £80 a year on a heating bill. So, employees could put on an extra layer or get under a blanket and see how much they could save.
Employees could also look to do washing on a cooler wash and only put it on when they have a full load. Most washing detergents work just as well even when washing at 30 degrees.
Think about the food shop
Most people have seen a significant rise in their food bill, but with some smart shopping they could potentially reduce their weekly bill. Firstly, employees should always plan ahead. This includes creating a weekly meal plan, writing a list of exactly what’s needed and looking for any current offers which could be of benefit. They can also save money on food by shopping for seasonal items as these tend to be cheaper. Convenience foods such as ready meals are usually more expensive, so cooking from scratch can really reduce your employees’ bills.
Check their employee benefits
If you offer employee benefits, there is no better time to promote them as there can be substantial savings for employees. Some benefits might include discount vouchers for popular retail chains including big supermarkets, which could save employees hundreds a year. You may also have travel discounts or loans to help with commuting costs or a cycle to work scheme so employees can reduce their fuel costs. Don’t forget to promote any financial education programmes on offer which can help support your employees’ financial wellbeing, or signpost them to a trusted online wellbeing portal. A simple reminder of what’s available could go a long way.
Build an emergency fund
Now more than ever, you should encourage your employees to build an emergency fund. This is the equivalent of three months of expenditure, ideally growing this to six months, worth of savings. This is to help cover their main financial commitments should employees find themselves in financial hardship.
Employees who need extra help
If some employees are really struggling with the increase to the cost of living, they do not have suffer in silence. Citizen’s Advice offers free and confidential advice and can help them get the right support. There is also Money Helper which is Government backed and offers free impartial help with money problems.
Remind employees that most people will be hit in some way over the next few months, so talking to friends and family can relieve some of the stress and they may find others have tips on how they are beating the crisis. Keeping an open dialogue with employees is really important too and encourage people to open up and talk to their colleagues and managers.
To find out what employee benefits, workplace wellbeing and financial education support Secondsight can offer you and your employees, visit our website here.
Secondsight is a trading name of Foster Denovo Limited, which is authorised and regulated by the Financial Conduct Authority.