Since October 2021, the UK has been facing the worst cost of living squeeze in a generation. The inflation rate has fallen considerably in the last few months, but higher energy and food prices are here to stay and interest rates remain at a 16-year high.

Workers are continuing to come to terms with higher costs that have outpaced pay increases. In this context, what it means to be a responsible and supportive employer is changing. Together with the Pentland Centre for Sustainability in Business at Lancaster University, the Work Foundation is revisiting our Shifting Sands report (March 2023), which examined how the cost of living crisis is shaping the way employers approach financial wellbeing at work, in order to understand how responses are evolving in 2024.

High costs and worker shortages still impacting employers but pressure is less widespread

The impact of rising production costs on businesses has fallen in the last year. A third of senior business leaders surveyed (35%) said their production costs have increased, compared to 41% in 2022.

Worker shortages continue to challenge operations, but now nearly half of employers (46%) state they have no issues with recruiting or retaining staff, up by 16% on the year. Larger organisations (250+ employees) are much more likely to face issues than SMEs.

Staff wellbeing is still a priority but there remains a ‘say, do’ gap

Two thirds of employers (62%) agree they have a major responsibility to support staff through the cost of living crisis, down slightly on the year. However, there continues to be a gap between what senior leaders say and the actions they have taken, with only 38% reporting that they have introduced new support since the start of 2023.

Workers feeling poorer but employers not committing to pay rises in 2024

Financial wellbeing is broader than pay alone but only three in 10 employers surveyed have committed to providing pay increases above the level of inflation in 2024. The UK is still in an 18-year pay squeeze with the OBR predicting that real wages will not return to 2008 levels until 2026, and the cost of living crisis has only made things worse. In an uncertain economy, predictable and stable pay – that keeps up with or outpaces the rate of inflation – is most important to workers on low incomes and insecure jobs.

Figure 6. The types of financial wellbeing support being planned by employers in 2024

Source: Work Foundation survey of senior decision-makers across GB (March 2024: n=1,052), respondents could choose multiple answers

Read the full briefing here

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