Cost of living crisis: how can you help your employees?

The annual inflation rate in Australia ballooned to over five per cent in the first quarter of 2022, driven by hikes in fuel prices and building costs. The Consumer Price Index (CPI), which measures the cost of goods and services, recorded jumps in almost every category it tracks.  

Media headlines are filled with short-term coping strategies but we shouldn’t lose sight of long-term, more holistic strategies for reducing financial stress because, while this is a global event, money troubles are not new or infrequent in the lives of employees.

The current crisis will (at some unknown point) stabilise and we need to understand how to be bulletproof against, or at least minimise the shock, of our next financial crisis.

So, how can employers help?

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1. Recognise there are differences in your workforce

The current cost of living crisis is affecting us all, as the pandemic did, in varying degrees. The severity of how current conditions impact you will largely depend on your employment situation, your financial wellbeing and how resilient your behaviours are. 

A high level of financial wellbeing may mean you’re facing the current price hikes in a relatively stable position - you’re good at budgeting and shopping around for lower prices, you know how much money you need for every week’s bills and have money already set aside that has a buffer built in for variability. You won’t be rolling over credit card debt each month as you have emergency money set aside for any unexpected costs. 

If your income is variable or you’re not highly paid and your financial wellbeing is at the lower end of the spectrum, your ability to cope with rising costs will be more limited. With no emergency buffer or savings, your ability to cope with rising bills and expenses is limited to increasing your debt or moving costs out through payment plans. You may incur fees for late payments on bills that were higher than you expected and for shift workers, your only option may be to work more hours to cover the costs which could impact your family and mental wellbeing.

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2. Focus on resilience, rather than coping

While it’s important for people to consider what they can do to minimise their costs right now, wearing a jumper so you don’t have to put the heater on isn’t likely to be a long term solution to long-lasting financial issues. More has to be done and employers are in a unique place to provide this support.

An employee financial wellbeing program that focuses on resilience and future proofing your employees to financial shocks through education, savings and access to emergency funds when they’re needed can help improve the financial wellbeing of your people over the long term. 

The relationship between education and tools is pivotal. Education is key so people can understand what’s going on and where they can make improvements. Tools are important because they give employees the means to actually make these improvements by doing things like reducing debts or putting money aside each pay cycle. 

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What next?

The current situation is challenging and employers don’t need to have all the answers. Taking the time to listen to your workforce and understand the issues they’re facing can help to provide clarity.

Read more about how to build an effective financial wellbeing program.

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