Supporting employees through the cost of living crisis
The cost of living crisis: it's the small things that can make a big difference.
The cost of living crisis: it's the small things that can make a big difference.
There are two ways employers can provide support with the cost of living crisis; increase employees’ pay or reduce their costs.
Increasing employees’ pay
Increasing pay is a costly solution that might not help all employees as cash awards attract tax and NIC deductions, and impact entitlement to universal credit and other benefits such as child benefit. In addition, the experience of many employers is that the initial positive impact on employee engagement is often short-lived as employees quickly get used to their new earnings.
Supporting your employees with their costs
A more effective and impactful alternative may be to cover some of your employee costs. In many cases this can be done without attracting tax and NIC or impacting on universal credit and other benefits.
In our experience, feedback indicates that employees are placing greater value on small, interesting and unexpected benefits provided by their employer, which help reduce the impact of the cost of living pressures.
Examples include:
- Free meals available to all employees that are covered by the staff canteen exemptions;
- Staff welfare benefits (e.g. free feminine hygiene products, that are covered by the trivial benefits exemption);
- Staff entertaining events where the employer can settle the tax and NIC charge via the PAYE Settlement Agreement;
- Cash allowances which can be paid income tax free to employees who are required to work from home under the conditions of the Working From Home allowance;
- Access to discounts at gyms, supermarkets etc; and
- Reviewing/introducing Employee Assistance Programmes to ensure they include support on finance and debt management.
The list goes on…but the examples above illustrate some of the options available to support employees and complement your benefits strategy and Employee Value Proposition (EVP).
How KPMG can help
Our Employer Reward Services team are working with UK employers across all sectors and size to assess and improve the effectiveness of their reward and benefits strategy and their EVP.
They would be happy to discuss how they can support you to develop your strategy by establishing:
- Where you are in relation to other employers;
- The value derived from each benefit and the benefit provider;
- Opportunities for diverting investment from one benefit to another; and
- How your benefits strategy can evolve to better support your people and business objectives.
If you would like to talk through how KPMG in the UK can support you with any aspect of employer reward and compliance, please get in touch with Caroline Laffey, Scott Cullen, or your usual KPMG contact.
