Responding to the Cost of Living: How Scottish employers can help

The UK has been in a cost-of-living crisis since the end of 2021. Latest data from the Office for National Statistics  shows around half of adults’ report their cost of living had increased in the past month. 

A recent Howden Employee Benefits research report, ‘Employee Benefits and Wellbeing in Scotland’ reveals the significant impact the cost-of-living crisis is having on businesses and employees. 

Three-quarters of employers highlighted it as the biggest challenge their employees face and 62 per cent said it was affecting the ability of their employees to meet their daily needs. 44 per cent of employers also said financial constraints are impacting their ability to attract and retain talent.

This article explores the financial challenges affecting Scottish employees and what businesses could do to support them. 

Impact on Scottish workers 

In Scotland, latest figures show the cost-of-living challenges are continuing to impact household finances with two in five (42%) people cutting back on food shopping and essentials, and similar numbers (41%) using less fuel such as gas and electric. 

With energy prices still high and inflation continuing to push up food and housing costs, with rising rent and mortgage payments adding to the pressure.
While some inflationary pressures have eased, those on lower incomes are still feeling the squeeze. Many have little to no financial safety net, forcing them to make difficult choices about what to cut back on. The impact of the crisis is not uniform, which complicates the response for employers trying to support their staff.

Challenges for businesses and employees 

Employees are grappling with rising living costs while wages have not kept pace with inflation. This disparity is causing significant stress, particularly for younger workers dealing with high property prices and rent, as well as for older employees hit by rising food and fuel prices.

The lack of wage growth, combined with escalating costs, means many employees are struggling financially, which can lead to decreased productivity and absenteeism.

Financial pressure doesn’t exist in isolation though. Poverty and financial strain are key drivers of poor mental health and the Mental Health Foundation  found that the cost of living is still causing widespread mental distress. 

A report revealed that at the end of 2023, 32% of Scottish adults felt anxious about their financial situation and 34% said the increased cost of living caused them to begin or increase unsecured debt .

Workers under financial pressure often experience heightened anxiety and stress, which can affect their overall wellbeing and performance. This is why businesses must think creatively about the benefits they offer to support employees, especially when direct wage increases may not be feasible.

Practical steps employers can take

• Enhance compensation and benefits packages - Customise benefits to meet employee needs. For example, offering transportation subsidies, meal allowances, or employee discounts on essential goods. Health and wellness benefits, like private medical insurance or cash plans, can also help reduce employees' out-of-pocket expenses.
• Provide financial wellbeing support - Address financial stress and mental wellbeing by providing financial education. For instance, financial literacy programmes, budgeting workshops, or one-on-one coaching. Salary sacrifice schemes can also help employees save on tax or boost their pension contributions.
• Focus on mental wellbeing - Expand access to mental health resources, like counselling services or employee assistance programmes (EAPs). Also create a culture that promotes a better work-life balance. Offer flexible working, encourage people to take breaks and ensure people use their annual leave to reduce stress and prevent burnout.
• Open communication and leadership - Clear and honest communication is essential. Keep employees informed about the company’s financial situation and the support available to build trust. Establish feedback loops, such as surveys or forums, to allow employees to share concerns and suggestions, promoting a more supportive environment.
• Employee discounts and perks - Howden’s research showed 28 per cent of businesses are offering discount sites to help employees save on their day-to-day spending.  Employers can negotiate discounts for staff with local retailers, supermarkets, or service providers to make a difference to their everyday spending. 

Looking to the future

The cost of living won’t be resolved overnight, so it’s important employers stay proactive as they have the power to make a significant difference in their employees' lives. Understand the needs of employees, tailor benefits, and keep communication lines open. It’s all about supporting employees through these challenging times, while also ensuring the business stays resilient. Also, by investing in upskilling and career development, businesses can help boost their employees' earning potential, contributing to long-term financial stability. 

Howden has a dedicated employee benefits team in Scotland and can help employers in Scotland design bespoke health and wellbeing strategies aligned to meet the needs of their individual business, employees, and budget. For more information and to download a copy of the research click here.

 i https://www.ons.gov.uk/peoplepopulationandcommunity/wellbeing/bulletins/publicopinionsandsocialtrendsgreatbritain/latest#cost-of-living
 ii https://www.gov.scot/publications/scottish-economic-bulletin-july-2024/pages/6/
 iii https://www.mentalhealth.org.uk/about-us/news/cost-living-still-causing-widespread-mental-distress-new-data-shows
 iv  https://www.mentalhealth.org.uk/about-us/news/new-data-shows-cost-living-still-harming-scots-mental-health-third-going-debt-pay-essentials