How the cost-of-living crisis is impacting the employment market

In the UK, employers and employees are facing several changes in the employment market. The combination of the cost-of-living crisis, inflation, and a possible recession is forcing UK businesses and employees alike to look at what actions need to be taken to weather the storm. 

As of the 1st of November, inflation in the UK sat at 9.3%. This is one of the highest levels reported since 1982, but this is only the tip of the iceberg. According to the Bank of England, inflation is and will remain 'very elevated' throughout 2023. Of course, that is not the only issue that the employment market is facing. Energy bills are expected to rise further and fuel, transport, food, and living costs are putting a growing strain on many households. 48% of Gen Z and 54% of Millennials have admitted to living payday-to-payday with increasing stress about being able to cover their monthly expenses. Besides this, the Monetary Policy Committee has projected that the UK has already entered a recession in the fourth quarter of the current year, and this will continue into next year.

Already, a third of employees have considered or applied for a new job, and 65% are putting a salary increase as their main goal when job hunting. This shows just how much of an impact the cost-of-living crisis is having on the employment market. A few months ago, several other trends were the motivating factors, and a better work-life balance was what most people were searching for. Now, it’s mainly about salary, benefits, and keeping up with rising living costs.

According to a study by Deloitte, the young demographic is among those most affected by this economic crisis, as half of Gen Z and Millennials in the UK are using all their monthly income on living costs. Employees between the ages of 18 to 44 are those who are likely to need a salary increase of between £2,500 and £4,900 to remain loyal to their current employer. Data from the ONS has found that living standards fell by 3% between April and June of 2022. 

Many businesses are struggling to offer employees salaries in line with rising costs, which means that many employees are starting to look elsewhere in a search for higher wages. However, there is also an ongoing skills shortage to navigate, and almost half of employers have vacancies that are hard to fill with nearly 1,246,000 vacancies still open.

The effect of the cost-of-living crises on the UK job market

The cost-of-living crisis has had some very tangible effects on the UK job market. Here are some of these:

Increased working from home - Though some people are keen to return to the office to avoid rising energy costs at home, more people are looking to work from home to save on commuting costs. A lot of businesses have seen a decline in employees attending the office in recent months, and this could help them to reduce their overheads. With more hybrid working, employers can close their offices on certain days to save money. However, it’s important for employers to be as flexible as possible around remote working to support employees during this difficult time.

More employee income streams - To keep up with rising costs, many employees are taking on additional work or looking for other streams of income. This is something that employers need to be prepared for and need to be clear on what is and isn’t allowed contractually. The Working Time Regulations also ensure that employees don’t exceed a 48-hour working week limit, and this needs to be considered. 

Falling employee morale - To combat the impact of the cost-of-living crisis, a lot of businesses are scaling back. They are reducing incentives, holding back on benefits, and reducing headcount. This is having a negative impact on employee morale and is likely to accelerate employees seeking a new role and increased pay. During this time, employers should be doing what they can to maintain a supportive and positive workplace culture, even if they are struggling financially.

More pay rise requests – With the increases in the cost of living, many employees have been seeking a pay rise. Employers should expect these requests, as workers trying to keep up with rising costs Though this is likely to be difficult to accommodate, employers should remember those who have remained loyal to them and do what they can to deter them from seeking alternative opportunities.

How are companies supporting employees during the cost-of-living crisis?

With the cost-of-living crisis weighing on employees and employees, subsequently, looking to switch to jobs with the highest pay, some companies are taking positive steps to ensure they don’t lose their best performers. Here are some ways employers have tried to support their employees in these turbulent times:

• The UK-based carmaker, Rolls Royce, tried to help their employees through the current exceptional economic climate by announcing a one-off payment of £2,000 for more than 14,000 lower-ranked workers.
• Some major UK banks, including Barclays and Lloyds, are giving lower-paid staff out-of-season pay rises or cash bonuses.
• US-based technology giant, Microsoft, reportedly doubled its worldwide budget for merit-based raises.
• ExxonMobil, an American multinational oil and gas corporation gave its workers a one-time bonus of 3% of their salaries to weather price hikes.
• UK-based bank, Virgin Money, offered their staff a one-time bonus of £1,000, on top of pay rises in January of 5%.
• Some smaller companies in the US have also started giving workers gift cards or weekly stipends of $50 to help pay for fuel or are offering free food for staff who come into the office.

While the aforementioned companies have made some great efforts to help their employees during the cost-of-living crisis, not all businesses are able to afford similar monetary assistance. For such companies, focusing on factors like flexibility, benefits, environment, training, and health benefits might be the ticket to riding out the inflation and retaining top talent. 

Redline Group’s mission is to enable high-technology companies to build world-class teams through knowledge-led recruitment. We have provided exceptional professional talent for the European Technology industries since 1982 and pride ourselves on our knowledge of the engineering and technical sector, and our consultants are always up to date on the latest market trends. For more information regarding how we can help, please contact us on 01582 450054 or info@redlinegroup.com.