How Employee Benefits Packages Can Help with the Cost-of-Living Crisis

How Employee Benefits Packages Can Help with the Cost-of-Living Crisis

The ongoing cost of living crisis has placed significant financial strain on many households. As prices for essentials rise, employees are increasingly looking to their employers for support. One way businesses can help is through comprehensive employee benefits packages that address these economic challenges.

Economic Challenges Faced by Employees

Rising inflation has led to higher costs for everyday expenses, from groceries to housing. This financial stress can negatively impact employees’ mental health and well-being, leading to reduced productivity and lower morale. Many workers are finding it difficult to maintain their standard of living, resulting in decreased disposable income and heightened anxiety about the future.

Data from Money Advice Service highlights these challenges Employees face

• 59% of employees say they can’t read a payslip properly.
• 29% don’t know what will happen if they don’t pay their council tax.
• 50% do not save regularly.
• 68% find keeping up with their credit commitments and bills a burden.

Role of Employee Benefits in Alleviating Financial Strain

Employee benefits can play a crucial role in helping workers manage these challenges. By educating employees on how to effectively utilise their benefits, companies can offer tangible support. For instance, salary sacrifice schemes can help employees save on taxes. Health insurance and mental health support programs are also valuable in promoting overall well-being during tough times.

Salary Exchange for Pension Contributions

One way to provide support to employees is through salary exchange for the deduction of their pension contributions. Over the past year or so, there has been an increase in employees asking whether they can stop making their pension contributions. While saving for retirement is important, some find it difficult to prioritise this over having disposable income in the present. Salary exchange doesn’t necessarily solve this conundrum, but it does allow employees to make their contributions in a more cost-efficient way. With salary exchange, contributions are deducted before tax and National Insurance deductions, providing relief at the highest marginal tax rate — 20% for basic rate taxpayers and 40% for higher rate taxpayers. Additionally, employees do not pay any National Insurance contributions on that salary deduction, saving an additional 10% for basic rate taxpayers and 2% for higher rate taxpayers in the current tax year. Salary exchange also allows employers to save on Employer National Insurance contributions, potentially freeing up the budget for additional benefits that can further support employees.

Source: Income Tax rates and allowances for current and previous tax years - GOV.UK (www.gov.uk)

Three Employee Holistic Well-being Factors to Consider

1. Physical Well-being: This is not just the absence of disease but also the balance of physical activity and proper nutrition to keep the body in top condition.
2. Mental Well-being: It allows individuals to realise their potential, cope with the stresses of life, and work productively and fruitfully.
3. Financial Well-being: Defined as having financial security and freedom of choice in the present and future.

Value-Added Services from Providers

In response to the current economic environment, many benefits providers have introduced new services designed to offer additional support. Personalised financial advice can help employees make informed decisions about their money, while well-being programs address both physical and mental health needs. These innovations show a commitment to not just maintaining but enhancing the value of employee benefits in a challenging economic landscape. Financial advisors aim to provide this insight and information on how to navigate these complexities because these things are not taught in school.

Pay Check Limited has tailored payroll solutions that integrate employee benefits, ensuring that workers maximise the advantages offered by their employers.

Mattioli Woods focuses on wealth management strategies that provide long-term financial stability, helping employees navigate the complexities of personal finance during a crisis.

To conclude, enhanced employee benefits packages are more than just a perk—they’re a lifeline for workers during financial hardships. By offering a range of well-structured benefits and educating employees on how to use them, companies can foster greater loyalty, satisfaction, and overall well-being. Now is the time for employers to reassess and enhance their benefits offerings to meet the evolving needs of their workforce.

For more information on managing employee benefits during economic crises, consult Pay Check or Mattioli Woods to explore additional resources on effective benefits planning. Feel free to contact us at Pay Check for a consultation regarding payroll outsourcing or join us for our next webinar to learn more.