Out-Law Analysis 2 min. read

Cost-of-living crisis raises questions for employer ESG strategies


Workers across the UK are beginning to feel the financial pinch of the cost-of-living crisis, prompting many employers to ask what support they can offer.

In recent years, employers have faced increasing pressure – both from their employees and by the public at large – to respond to issues which would historically have fallen outside the domain of the workplace. Responding to the cost-of-living crisis is one such issue, which now sits firmly within the ‘social’ element of employer environmental, social and governance (ESG) strategies.

The UK is currently experiencing the lowest level of unemployment for more than half a century. Earlier this month, government data showed that job openings outnumbered those seeking work for the first time on record.

In such a competitive market for talent, demonstrating leadership on the cost-of-living crisis can represent the difference between a firm attracting and retaining talent, and that talent going elsewhere.

Financial support for employees

The most obvious measures that employers can take to support their workers in the current crisis include providing some form of financial assistance. However, care should be taken not to establish arrangements which may either need to be replicated each and every time there is a similar downtown in the future, or which could create an ongoing or incredibly expensive burden on employers.

Such a burden could impact their viability and therefore do more harm than good if an employer ends up out of business or unable to properly remunerate its workforce. Employers also need to bear in mind that, with inflation set to reach double digits later this year, they are likely to have to consider pay increases if they have not already.

While a decision to subsidise lunches and snacks might seem like a small change, it would provide an additional level of support for workers struggling financially. Other arrangements, like allowing employees to sell back ‘excess’ holiday – while ensuring of course that legal minimum holiday requirements are observed - or allowing more flexibility around pension and salary sacrifice schemes could also be beneficial.

Some employers have previously taken the step of creating benevolent funds for their workers. While these were initially designed to support social mobility more generally, funds could be adapted in light of the current crisis to provide support to employees most in financial need.

Flexible working

Supporting employees to work from home to reduce their travel costs or adopting a more flexible approach to working patterns can help them financially. For employers that might struggle to reduce the number of times a worker is expected to travel to a place of work - perhaps due to the type of work – subsidising their travel costs is an obvious option to consider.

There is, however, an argument that as energy prices rise, employees may be keen to come into a place of work to avoid having to heat their homes. Allowing employees to do so rather than adopting rigid approaches to work location and hybrid working can be helpful - although not always possible where an employer does not physically have the capacity to support people working from an office or work location other than home.

Training and wellbeing

Meanwhile, non-financial support can include webinars, training, coaching and support for financial health and wellbeing, money management and mental health support. Employers might also be able to help formalise their employees’ working from home arrangements, putting them in a better position to claim any available tax relief.

Formalising arrangements requiring home working can help employees claim this tax relief - though care and advice needs to be taken before making contractual commitments on those lines.

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