Few business sectors have escaped the recession in the last few years. Wage freezes, pay cuts and pay rises below the rate of inflation have cut most salaries in real terms. Even where employees accept the situation and value their job, the annual salary review still means another year of difficult conversations.
So when you cannot offer a pay increase that matches inflation, you have to think more creatively about remuneration.
Some costs are rising faster than others. So if you cannot afford to give as much money as you would like, why not provide more value by through additional benefits. Areas such as travel, fuel and childcare are notoriously expensive. If you can offer a range of staff benefits where the cost to the company is less than it would cost an individual
Below are five areas where the cost of living is higher than average wage inflation.
Banks are still reluctant to lend and the cost of borrowing is rising, so a staff loan scheme (i.e. to buy season tickets, etc.) could be very attractive. From April 2014, the exemption threshold for staff loans is increasing from ?5,000 to ?10,000.
Since December 2008 petrol has risen from around 89p/litre to 134p/litre ? an increase of around ten per cent a year. If people are out and about during the day, claiming a petrol allowance, it may be worth your while to provide a pool car for them to use. Alternatively, where employees have a long commute, providing the option to work from home one day a week will cost you nothing but could save them 20 per cent of their travel costs.
Childcare costs in the UK are among the highest in Europe. OECD?figures put UK childcare cost at 43 per cent of average income, where as in France it is 14.8 per cent, in Germany 9.1 per cent, and in Denmark 8.4 per cent. Exchanging salary for childcare vouchers provides an immediate benefit for staff through reduces income tax and NI. However, you could go further by providing flexible working arrangements that allow people to reduce their childcare costs.
As people are living longer, insurance premiums for older people are rising rapidly. Employers offering a group scheme to all staff could find this is particularly attractive to their longer standing employees.
The cost of travel rises every year, yet no one wants to forego their 2-week summer holiday. Offering your staff travel vouchers that will help them pay for a large chunk of their summer holiday is a great way to pass on a valuable benefit.
Ed Hussey is the?Head of HR Consultancy at Menzies, a leading UK firm of accountants and business advisors.
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