What can you do when you can’t afford salary increases?
Author
Rob Birley
Updated
All around us is news of the cost of living crisis. Inflation in June 2022 hit 9.1%, a 40 year high. Strikes are increasing as the unions flex their muscles. But what can you do when you can’t afford salary increases? With the average award now at 4.3%, that could be a substantial increase to your wage bill.
Why might employers not be able to afford salary increases?
Many employers may not have a great deal of spare cash at the moment. After all we’ve just emerged from the Covid pandemic which in itself was a huge financial shock for the UK and beyond. Many businesses are paying back CBILS and Bounce Back Loans. They may have also accrued debts during lockdown. All this leads to an increase in costs. It may simply not be possible to increase the salary bill at this time.
Salary increase alternative 1 – One off bonuses
If you are worried about building on base salaries but have some cash available, then one off bonuses might be the way forwards. The payment is obviously taxable in the normal manner and by structuring the payment this way, it may not be pensionable. So the impact on your bottom line will be reduced.
Salary increase alternative 2 – Work from home
If you can’t increase pay, cut costs. Where job role allows, if you allow people to work from home, they will reduce commuting costs. Potentially, there could also be some savings on wrap around care for those people with children who are old enough to be left alone for periods of time. There’s also less chance of that nice coffee being purchased. Over a year, this could amount to quite a saving.
Salary increase alternative 3 – Employee Benefits
In a similar vein to option 2, introducing employee benefits could lead to cost savings. Options such as Health Cash Plans can cut the cost of day to day medical expenses. They also don’t need to cost you much. Many organisations provide a basic level of cover and allow employees to top up from their own salary.
Other options that can reduce costs are
- Cycle to work schemes
- Technology and mobile phone benefits
- Nursery fees
- High Street Discounts
Salary increase alternative 4 – Employee Development
Ok so maybe you can’t afford to give salary increases but if you can offer employee development, that offers the hope of future increases. With the apprentice levy, it is possible that non-levy employers could have 95% of the cost of training paid for. Developing your employees needn’t cost the earth.
Salary increase alternative 5 – Work life balance
Forbes found that 90% of US employees valued work life balance as one of the most important factors of a job. With 70 UK companies currently trialling a 4 day week, could you restructure roles to give people more time back with no salary impact? We are currently helping a local employer in Stockport trial a reduction in working hours. So whilst they haven’t gone down the full 4 day route, they are asking people to work fewer hours for the same pay and conditions.