As UK inflation hits a 40-year high of 10.1%, money worries are increasingly damaging employee health and wellbeing. 

People Management report that more than two-thirds of workers have felt stressed, anxious or depressed thanks to their financial situation, for instance. Another recent study found that UK employees are becoming so anxious about the cost of living crisis that it's impacting their performance, with two-thirds of managers reporting rising absenteeism and lack of engagement. 

Further, 31% of employees report their financial worries are causing them to lose sleep, and 21% report feeling mentally or physically exhausted. 15% say their financial situation is putting a strain on their relationships.

The energy crisis is one of the biggest drivers of financial insecurity, with 10,000 homes a month being pushed onto pre-payment meters. Two-thirds of adults in Britain report an increased cost of living and 79% cited higher gas and electricity bills as a cause.

As winter continues, many employees are desperately wondering how to cut energy costs and better manage their household bills.

Supporting employees’ financial wellbeing is an important part of HR’s role. Being cold, anxious, hungry and exhausted isn’t the ideal condition for engagement, motivation or productivity. It’s a core truth within motivation theory: employers must meet employees’ most basic needs before higher-order priorities like career progression.

Furthermore, engagement is already a major challenge for many organisations across the country: UK workers are 82% less engaged than the global average, registering only 11% engagement.

Providing hands-on financial education is part of the solution – but as we’ll show you, this education must come alongside considered financial support. 

Supporting financial wellbeing

In the UK four million days are lost annually due to employees’ financial stress, according to research by financial services company Aegon. Employees said on average, money worries cost them two hours of productive output every day. This productivity hit costs UK businesses £1.6Bn every year.

In this context, providing better financial education is urgent – like showing employees how to cut down energy costs. Recent research reveals 60% of companies do now offer financial education classes to their workforce, for instance. 

But as well as sharing resources around cutting energy bills, employers should also look to incorporate support for these ideas into your benefits and rewards programme. For example, there are a number of ways employees could cut energy costs at home by making different installation and appliance choices:

  • Energy-efficient lightbulbs
  • Smart power strips to stop phantom power leaks
  • Smart thermostat control
  • Energy-efficient home appliances
  • Energy-efficient computer and monitors
  • Double glazing and insulation
  • Smart light switches

The Energy Saving Trust quantify the energy cost savings employees might expect from making changes like these. Providing employees with practical, hands-on financial resources like this can be empowering and help galvanise change.

In many of these cases, you could incorporate financial support like cashback and incentives to help employees with the upfront costs of making these switches. You could also consider starting an internal communications channel where employees can share their own tactics for saving energy, and other useful financial advice.

How to cut energy costs: return to the office? 

One big question worth considering during the energy crisis is the impact of rising bills on employees’ desire to work from home. We know flexible working has been one of the major outcomes from the pandemic, with 96% of UK organisations now offering more flexibility about where employees work. 

But continuing questions around the potential impact of working from home on productivity see many employers exploring a return to the office.

Rising energy costs and the cost-of-living crisis more broadly might encourage employees back to the office, as a way to cut energy costs at home.

This is a difficult tightrope to navigate from leaders’ perspective. If employees feel their hand has been forced by inflation and rising energy bills, they might resent returning to the office – and return home again as soon as the crisis abates.

On the other hand, this could be a major opportunity for organisations to re-establish the benefits of working from the office while supporting employees' financial wellbeing during a difficult time.

For many employees, the pandemic powerfully brought home the benefits of working remotely, from caring for kids to avoiding the commute. But an unintended positive consequence of the energy crisis could be the opportunity to remind employees what working from the office has to offer.

Should rising costs mean rising wages? 

Providing employees with financial education is useful but it can’t stand alone. To combat the cost-of-living crisis, there’s also a major question around raising wages, or else employees are battling a real wage decrease as inflation bites.

So far, inflation-matching pay rises have rarely been forthcoming, with average pay in May stalling at less than half the inflation rate. This has driven a rise in industrial action with strikes at the likes of Royal Mail, British Airways, Network Rail and Ryanair.

That said, for many employers even increasing wages from national minimum wage to real living wage can be a positive step to protect employee financial wellbeing. For example, the Living Wage Foundation found that 63% of respondents believe the real living wage would improve their mental health.

It’s also critical to evaluate your organisation's pay equity. The cost-of-living crisis risks further fuelling inequalities that the pandemic has already widened.

Research from the Women’s Budget Group shows how rising costs have a disproportionate impact on women, people from Bangladeshi, Pakistani and Black ethnic groups, disabled people, single parents, victims/survivors of domestic violence and abuse, and women with ‘no recourse to public funds’.

Handing employees information with a handful of ways to cut energy costs isn’t good enough. Leaders must take this opportunity to scrutinise compensation across the business, to ensure transparency and equity.

Creating a culture of financial support 

Providing guidance around specific tools and tactics to reduce costs can be useful, but to meaningfully support employees’ financial wellbeing, your focus should be on your culture and company values.

  • Do employees feel they can raise financial issues at work?
  • Can employees readily access confidential support and advice?
  • Are your managers trained to spot the signs that someone may be struggling?
  • Are your managers equipped to have compassionate conversations?
  • Do employees typically have close workplace relationships providing support and advice?
  • Is talking about mental health normalised within your culture?

The UK is facing a period of massive financial hardship. Recent reports say 20% of adults in the UK have now fallen behind with their bills and deprivation is expected to hit its worst level in two decades. Organisations are seeking ways to protect financial wellbeing, not only with practical advice on how to cut energy costs but with a robust programme of support.