Each month, we ask our panel of business and HR leaders about the hottest topics impacting employee engagement in UK businesses.
In February, with the cost of living at its highest since 1992 (5.4%) we asked about the impact the cost of living (COL) increase is having on employee engagement.
Here’s what our leaders told us....
(To find out more about how we conduct the survey, or to get involved read to the end of the article)
The cost of living is having a negative effect on employee engagement.
We asked our panel, to what extent they agreed with the statement: “the cost of living is having a negative impact on employee engagement.”
The majority, 43% of our panel, agreed or strongly agreed that the COL is having a negative impact on employee engagement.
28% said that they disagreed or strongly disagreed with the statement.
So whilst we can see that the cost of living is having some impact on employee engagement, we’re pleased to see that it isn’t impacting all organisations negatively.
Here’s what some of our panel told us: “Being at the far end of a (so far) two year pandemic and the associated pressures including COL, it feels fairly negative at the moment.”
“We’re in a fortunate position in that we’ve been able to give a 4% salary increase to all employees. It has been really well received as I expect people have started to feel the pressure of increased costs”
How concerned should employers be about the impact of COL on employees?
57% of our panel thought that employers should be concerned about the impact, with 27% saying they should be very concerned.
So whilst all organisations might not be feeling the impact on employee engagement - there is still the need to be concerned about its implications on employees, and in turn, the organisations themselves.
One of our panel commented: “Resignations Increasing due to offers being outside the amounts we can match. Engagement gone down, absence gone up - is this because people are stressed/anxious and it’s impacting their work life”
Should organisations be prioritising steps to reduce the impact of COL?
Whether our panel agreed or disagreed that there was an impact of cost of living on engagement, a huge 73% said employers should be prioritising steps to reduce the impact.
Our panel commented: “I think there will be a greater expectation on employers to do something financially, to support the increased costs we are all facing. Working for a public sector organisation, there is already increasing pressure on resources so this will only further exacerbate the issue I feel.”
“I've noticed there is a huge amount of opportunity in all markets now, (post covid) and it's very exciting for employees to also feel this boost. As a leader it’s a challenge of communicating and inspiring.”
What factors are likely to be impacted by the COL increase in organisations?
We asked our panel which factors they thought would be likely to increase as a result of the increase of COL.
Of this list we gave them, our panel identified these three areas are the most likely to be impacted.
- Salary costs
- Absence issues / mental health concerns of employees
- Resignations and employee turnover
We presented our panel with a list of 8 impacts, with the responses being spread across them all, indicating that the implications might be widespread for employees and organisations.
Our panel commented: “I think we have a responsibility as an employer to be aware of anything in the macro environment that impacts our employees wellbeing and mental health. Clearly this is currently an issue. I don’t necessarily agree that a simple increase in pay is the solution.”
So what are the key takeaways here?
From our research some key themes emerged;
- The cost of living is having an effect on engagement, impacting it negatively for many organisations and employees.
- Whilst the immediate consequences of increased costs will be felt in individual employee’s pockets, it is an employment issue also. This will affect organisations in a number of different ways.
- There are likely to be noticeable impacts on employers that not only will increase salary costs, but have other ramifications on cost and performance, such as absence issues / mental health concerns and employee turnover.
- Organisations are taking steps to overcome the impacts and many are making it a priority - as always, those organisations who are taking proactive steps to protect employees and engagement are likely to be those that retain and attract the best talent.
Some of the other insight experience and comments our leaders shared on this topic can be seen below;
“There’s going to be increased pressure on both employers and employees with the COL implications and this will naturally knock on to engagement. Employees may feel more obliged to stay in a role that they are unhappy in, and may feel resentful and disengaged.”
“I think the smart employers will take a view on what measures they could put in place to ensure they’re one of those organisations that people want to move to or stay at. For example, interest free loans for energy bills. One-off loyalty bonus payments to help cover those costs. Salary increases in line with COL increases (company fortunes permitting, of course). Viewing any resignation as an opportunity to save and fund uplifts elsewhere - don’t assume you have to replace like for like - a leaver’s salary could be redistributed to team members willing to take up the slack.”
“I wonder if it is perhaps too early to really understand the impact of COL increases on Engagement. It seems likely there will be some impact, if only because the additional worry will be a distraction for employees. What I do think, though, is that it will inevitably lead to some employees looking in the market to see if they can improve their earnings to keep up with COL (because it is often said that changing jobs is the best way to secure the best pay rise).”
“Data we’re getting back supports the hypothesis that people are definitely feeling overworked and underpaid. Life outside of work can’t be left at the office door, it’s got to be a running topic of discussion in the workplace. Open conversation about personal financial pressures will not only help staff feel supported, it can also relieve pressure not to mention act as context for any absences, dips in performance or attendance.”
“It’s really strange and challenging times at the moment. I don’t think we’ll see the impact of what is happening economically and socially immediately. But I do think we may be suffering consequences for the long term”
“The issues is the systems and processes the employee or leadership work under. More attention needs to be placed on the pressure of the shareholder, how they are able to extract billions, then bare minimum costs of living are covered. The Tax system doesn’t recognise that employee face into high costs to be able to work, to enable the profit to be taken, this is surely a legalised form of exploitation?”
“There has definitely been rumblings that the organisation should reflect COL increases by increasing salaries. However personally for my team I don’t think there has been any negative impact on performance or engagement. This is more than likely partly due to the demographic situation of my team who will all have a good level of disposable income so are possibly not feeling the effects as harshly as some employees.”
“I think financial well-being is something we don’t consider enough, prices are going through the roof and things are bleak out there. The world of work will have a significant scale to address from stress, presenteeism, resentment from employees who are held financial hostages by their workplaces. It’s going to be a difficult one to manage as companies may feel the effects of the economic downturn too. It’s a bit catch 22 for some.”
Be part of something special....
The Ten Space 'Feedback 500' is a piece of monthly research we conduct to understand more about the topics affecting employee engagement. Each month we send our leadership community 5 short topical questions via WhatsApp. All responses are captured anonymously. We have leaders from a wide range of sectors including: HR consultants, recruitment, retail, automotive, creative arts, construction, technology, utilities, e-commerce, digital, marketing, legal, health, public sector and education.
