Hard times: How the cost-of-living crisis is affecting the workplace

Against the backdrop of the UK’s worst cost-of-living crisis in decades, with the annual rate of CPI inflation increasing by 10.4% in February 2023, CIPD research finds that fewer employees are finding it easy to pay their bills.

In winter 2022,¹ a YouGov survey commissioned by the CIPD found 61% of workers said they were keeping up with all their bills and credit commitments without any difficulties. However, by winter 2023,² this proportion had fallen to 48%.

Over the same period, the proportion of staff who reported they were keeping up with all their bills and commitments, but it was a struggle from time to time, had risen from 26% to 33%, while the percentage who said that they were keeping up with all their bills and commitments, but it is a constant struggle, had grown from 8% to 12%.

Only 42% of female employees now say that they are keeping up with their bills and financial commitment without any difficulties. Similarly, only 34% of those earning less than £20,000 and 45% of those earning between £20,000 and £39,999 are also able to say the same.

While in winter 2022, 48% of those staff disclosing a disability reported that they were keeping on top of their bills, by winter 2023, this figure had slumped to 33%.

Table 1: Percentage of employees reporting that they are keeping up with their bills and credit commitments without any difficulties at the moment, by gender


	All	Male	Female
Winter 2022	61%	65%	56%
Winter 2023	48%	53%	42%

Table 2: Percentage of employees reporting that they are keeping up with their bills and credit commitments without any difficulties at the moment, by annual pay


	Below £20 000	£20 000 to £39 999	£40 000 to £59 999	£60 000 and over
Winter 2022	44%	59%	73%	79%
Winter 2023	34%	45%	60%	74%

Table 3: Percentage of employees reporting that they are keeping up with their bills and credit commitments without any difficulties at the moment, by sector


	Private sector	Public sector	Voluntary sector
Winter 2022	62%	57%	64%
Winter 2023	48%	47%	49%

Pay becoming inadequate

In addition, between winter 2022 and 2023, our research found that the proportion of employees reporting that their pay was enough to:

support an acceptable standard of living, without having to go into debt to pay for food and bills, has fallen from 76% to 60%;
cope with a sudden financial emergency costing £300 (without having to use any savings) has dropped from 63% to 49%; and
help them save for their retirement has declined from 47% to 30%.

The data also shows that the percentage of workers saying that their employer was doing enough to support their financial wellbeing has dipped from 36% to 31% over this period.

Again, female workers are now in a less positive situation than male staff. For example, while 64% of men said that their pay was enough to cope with a sudden financial emergency costing £300, without having to resort to savings, just 56% of women could say the same. Similarly, while 37% of male staff said that their pay was enough to help them save for their retirement, just 23% of female workers also said this.

In addition, few of those earning less than £20,000 are now in a good financial situation with only:

39% able to say that their pay was enough to support an acceptable standard of living;

26% able to report that their pay was enough to cope with a sudden financial emergency of £300, and
15% able to state their pay was enough to help them save for retirement.

Table 4: Percentage of employees reporting that their pay was enough to support an acceptable standard of living, without having to go into debt to pay for food and bills, by gender


	All	Male	Female
Winter 2022	76%	80%	71%
Winter 2023	60%	64%	56%

Table 5: Percentage of employees reporting that their pay was enough to support an acceptable standard of living, without having to go into debt to pay for food and bills, by annual pay


	Below £20 000	£20 000 to £39 999	£40 000 to £59 999	£60 000 and over
Winter 2022	56%	76%	91%	92%
Winter 2023	39%	61%	78%	87%

Table 6: Percentage of employees reporting that their pay was enough to support an acceptable standard of living, without having to go into debt to pay for food and bills, by sector


	Private sector	Public sector	Voluntary sector
Winter 2022	77%	72%	79%
Winter 2023	61%	56%	65%

Table 7: Percentage of employees reporting that their pay was enough to cope with a sudden financial emergency costing £300, by gender


	All	Male	Female
Winter 2022	63%	71%	54%
Winter 2023	49%	58%	40%

Table 8: Percentage of employees reporting that their pay was enough to cope with a sudden financial emergency costing £300, by annual pay


	Below £20 000	£20 000 to £39 999	£40 000 to £59 999	£60 000 and over
Winter 2022	34%	60%	84%	88%
Winter 2023	26%	47%	71%	86%

Table 9: Percentage of employees reporting that their pay was enough to cope with a sudden financial emergency costing £300, by sector


	Private sector	Public sector	Voluntary sector
Winter 2022	64%	61%	63%
Winter 2023	50%	47%	49%

Table 10: Percentage of employees reporting that their pay was enough to help them save for their retirement, by gender


	All	Male	Female
Winter 2022	47%	55%	38%
Winter 2023	30%	37%	23%

Table 11: Percentage of employees reporting that their pay was enough to help them save for their retirement, by annual pay


	Below £20 000	£20 000 to £39 999	£40 000 to £59 999	£60 000 and over
Winter 2022	21%	41%	65%	77%
Winter 2023	15%	28%	46%	63%

Table 12: Percentage of employees reporting that their pay was enough to help them save for their retirement, by sector


	Private sector	Public sector	Voluntary sector
Winter 2022	47%	48%	43%
Winter 2023	30%	33%	30%

Impact of financial stress

Unsurprisingly, since winter 2022, the proportion of employees who report that money worries have affected their ability to do their job, has increased from 28% to 33%.

Overall, middle earners have been more likely to have been hit, with the proportion of those earning between £20,000 and £39,000 saying that money worries have impacted their work, rising from 31% to 35%, while the corresponding proportion for those earning between £40,000 and £59,000 increased from 23% to 28%.

These money worries are manifested in an increase in the percentages of the staff reporting health problems (such as stress or anxiety) from 12% to 17% and finding it hard to concentrate at work from 11% to 14%.

How HR teams can support employees

Thankfully, the rate at which prices are accelerating is predicted to fall. The UK’s Office for Budget Responsibility predicts that by the end of this year, CPI inflation will rise by 2.9%.

However, while the increase in the cost of living is set to decline, most goods and services are still going to cost workers more than they did last year. And it’s not just employees who are facing higher prices, so are their employers, which limits the financial support they can offer their staff.

Nevertheless, the CIPD is still encouraging HR teams to help their organisations review what they can do to support financial wellbeing in the workplace and how they can do it.

Also, we recognise that for some employers, certain interventions, such as creating training and development opportunities for workers on lower incomes, will take time to implement. In such instances, there are still things that can be done to improve the financial wellbeing of staff relatively quickly.

These can include: signposting employees to sources of reliable and impartial financial information and guidance; tackling workplace stigma around talking about money problems; offering flexible working opportunities, which can help reduce costs for those with caring responsibilities; or issuing warnings of financial scams. More ideas can be found at our cost-of-living crisis hub, which is updated on a regular basis.

Another possible initiative is helping staff save money for a ‘rainy day’. Our research highlights that many workers would find it difficult if they suddenly had to deal with an unexpected bill for £300. See how one employer, Suez, that has done this.

Overall, the CIPD believes all workplaces, regardless of size or sector, should have a financial wellbeing policy in place with three core elements: payment of a fair and liveable wage; support for in-work progression; and financial wellbeing support. To help people professionals, we have updated our guidance on employee financial wellbeing.

However, we recognise that not everything can be done in one go, so HR teams need to review their employer’s situation and decide where investment can make the biggest impact. We also recognise that employers can’t do everything and that other actors, especially the UK Government, have an important role in reducing the impact of the cost-of-living crisis.

¹ Our winter 2022 survey was carried out by YouGov and ran from 22 December 2021–15 January 2022.

² This year’s survey results come from our UK Working Lives survey, which ran from 12 December 2022–9 February 2023.

About the author

Charles Cotton, Senior Performance and Reward Adviser, CIPD

Charles has recently led research into the business case for pensions, how front line managers make and communicate reward decisions, and managing reward risks, as well as the creation of a good practice guide on the annual pay review process. He is also responsible for the CIPD’s public policy work in the area of reward and is a Chartered Fellow of the CIPD.

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