We are all painfully aware of the current cost of living crisis, driven by inflation and high interest rates resulting in an acute reduction in the real value of wages. In short, many employees are earning less in a more expensive world. This has led to an increase in employees suffering with stress and anxiety, and to many seeking new jobs with higher wages. How can HR support employees during this time?
But it’s not just employees that are feeling the strain. So too are the businesses in which they are employed. Operating costs have also increased substantially, resulting in significant pressure on businesses to increase productivity and cut costs.
And herein lies the squeeze; stressed, anxious employees who feel undervalued and de-motivated will not be productive. Indeed, many employers have reported that productivity has stagnated during 2023, at a time when increased productivity is most needed. This “toxic mix” of conflict and rising cost has resulted in a melting pot of challenges facing HR as we move into 2024.
A recent report by Work Buzz (Annual Employee Engagement Report) listed the three core priorities for HR professionals going into 2024: retention, recruitment and wellbeing. This podium of priorities has changed since 2022 in which we saw learning and development and recognition and reward sitting up top.
Issues with retention, recruitment, and wellbeing are all symptoms of the current economic crisis and employers and HR professionals need to think about how they can best navigate these uncertain times by balancing the needs of the business with the needs of its employees.
Three priorities for HR teams
As the cost-of-living increases, there is a trend in employees seeking new employment with higher wages. This is a cause for concern for many employers as the cost-of-living crisis has forced their hands to be tied, and they cannot compete with the wages of some of their competitors. Moreover, remote working has allowed employees to cast a wider geographical net when looking for another job – meaning employees are likely to have more options than they did pre-pandemic.
Of course, higher staff turnover means hefty recruitment costs, both in terms of time and money. As Work Buzz reports, ‘retention isn’t only a people challenge, it is a financial one too’.
According to Work Buzz’s report, the majority of HR professionals are struggling to recruit because there is a shortage of qualified candidates with the right skills. This may be a hangover from the “great resignation”, but it is likely to also be a product of the cost of living crisis – particularly for smaller businesses who find themselves competing with the wages and benefits of larger companies (as discussed above). According to Work Buzz, 22% of the HR professionals who took part in the report said that recruitment was a struggle because they couldn’t meet candidates’ salary expectations.
This in effect is causing staff shortages and has become a big problem for lots of employers. Staff shortages places strain on the staff that are working as they are spread thin on the ground and not feeling rewarded enough for it. This again feeds into the issue of retention but also has an impact on wellbeing, performance, and productivity.
It is no surprise that the cost-of-living crisis is impacting people’s mental health, as employees feel anxious to make ends meet. Wellbeing of staff may also be impacted by the sad and harrowing news of the conflicts in Ukraine, Israel and other parts of the world, which all feel too close to home and may have a direct impact on many UK employees.
Crucially, poor mental health has a significant impact on performance and productivity.
This year, as employment lawyers, we have seen a marked increase in HR professionals requiring advice in respect of managing the poor performance and absence of employees who are stressed, anxious and who, because of their mental health, are likely to be considered disabled under the Equality Act 2010.
These are tricky waters to navigate, as employers need to protect the business but also comply with their legal duty to make reasonable adjustments and protect their disabled employees from being treated unfavourably. It is so easy for employers to get this balance wrong when faced with performance issues where a disability (such as depression or anxiety) is concerned, and the risk of discrimination claims can be very real.
The toxic trait of these three priorities is that they are very hard to separate from one another. For example, to overcome the retention and recruitment crisis, employers may be tempted to pay their current staff a higher wage but expect higher productivity in return. Or perhaps businesses will offer a bonus for unreasonable targets to be met. Expecting more from employees for more pay is great in theory but can impact mental wellbeing as employees are overworked, over pressured and lack time for rest and personal leisure. These all contribute to a downfall in productivity, which, in turn, impacts the business.
How HR teams can help during a cost of living crisis
What can HR professionals do to ease the burden? There is no easy answer, and HR will need to find a solution that works for their particular business. However, here are some practical ways in which HR can help a business to improve retention, recruitment, and productivity:
Look beyond the salary. Caring for your employees does not always need a £ number. Think of other benefits that can be offered such as increased annual leave, introducing or enhancing healthcare / dental benefits, food / shopping vouchers (which could be linked to a performance recognition scheme), subsidized travel and/or encouraging employees to have a better work-life balance. Benefits like this go a long way in making employees feel valued, creating a happier and stronger culture, and deterring them from job shopping.
Manage mental health in the workplace. Consider proactive steps you can take to support mental health - as supported employees are often happier employees. In addition, poor mental health and poor performance go hand in hand, so seeking to address mental health issues and support employees before this becomes a problem will go a long way to help improve performance. ACAS has recently updated its guidance on ‘supporting mental health at work’ including useful suggestions such as employee assistance programs, mental health champions, training for managers and some helpful advice on what to include in a Mental Health Policy.
Manage performance in the context of disability. Mental health issues such as depression and anxiety are often at the heart of employee performance issues. Ensure managers are trained to spot the signs of underlying health conditions that may be impacting performance. Managers should be equipped to have sensitive conversations with employees about their wellbeing, and should be able to tackle performance concerns confidently. Managing the performance of someone who has a disability can be challenging, so ensure managers know how to approach this and the importance of making reasonable adjustments. Performance Improvement Plans or ‘PIPs’, when used properly in conjunction with reasonable adjustments, can be a useful tool for monitoring and measuring the effectiveness of adjustments in the context of seeking to improve performance.
Employee engagement. Cultivating a robust organizational culture that ensures employees are heard will make them feel understood, valued and recognised. Consider giving employees a seat at the table and a meaningful voice to influence business decisions and direction. Employee forums are a great way to make this happen. Increasing positive communication between management and employees will help to establish trust and make it more likely employees will speak up when they need help. Listen to what the people of the business need, and ideas they might have on how to improve it – it may save you in the long run.
Legal advice to benefit your business
At Boyes Turner, we have extensive experience advising employers, and in particular HR professionals, on ways to manage employee performance and productivity. We are experienced in providing creative and bespoke advice to protect our client’s businesses whatever industry they may work in. We also can advise employers on other benefits and strategies, which may help to retain employees at all levels. If you’d like to know more or require any assistance, please contact our employment law team today on [email protected].
Training for your teams
We also appreciate businesses may want to use a different approach to attracting and retaining talent, therefore we provide bespoke training courses to suit all levels of management. This, in turn, will engage your people with professional, individual development and improved team performance, wellbeing management, and to also help limit departing employees. For information about training, wellbeing, and development speak to Emma O’Connor, Head of HR Training and Legal Director [email protected].
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.