How to help construction employees with the cost of living crisis

The cost of living crisis continues to hit the headlines and impact on family budgets. Many employees are concerned about how they will pay their bills. At the same time, labour shortages are hitting the construction industry, with recruitment and retention a priority for employers to overcome this challenge.

One solution to support these efforts is for firms to consider providing assistance to employees to tackle the financial squeeze they face, which some employers in the sector have recently adopted.

Here are some practical steps that employers in the construction sector can take to help their employees:

Financial and mental wellbeing are interlinked: an employee concerned about their finances is likely to feel stressed. This could affect their performance at work and even lead to physical illness. Managers are in the best position to spot the early signs of stress among their teams and should be trained to know what to do if an employee appears to be facing challenges.

Financial wellbeing training is becoming more common. Its purpose is to empower employees to utilise the benefits and services offered to them, to give them practical tips on managing personal finances (including budgeting), and to signpost them to further help if they need it.

Many employers have extensive benefits packages, but employees may not be aware of some of the benefits they have access to, which could save them money and/or give them peace of mind. Some employers could do more to publicise employee discounts and other benefits.

Many employees are now looking for ways to save money and make their money go further. Here are some examples of what effective benefits packages might include:

Some employees have a glut of annual leave that has accrued during the covid-19 lockdowns. For those employees, selling annual leave back to their employer could be an attractive option. Of course, employers will need to remain mindful of employees taking the minimum statutory holiday entitlement to ensure they get adequate rest.

Some employers may have noticed more calls from employees requesting an increase in their mileage allowance since the cost of fuel has risen. Government guidelines have not changed on mileage allowance, meaning that employers can still pay 45p per mile up to the first 10,000 miles and 25p per mile thereafter. Employers may wish to consider paying in excess of the government guidelines, but should take tax advice on this first.

Many construction companies have chosen to give their employees a bonus to help cover rising prices during the cost of living crisis.

Offering a lump sum cash payment to employees would certainly go some way towards reducing the pressure on employees feeling the squeeze during the current climate, but this will not be financially viable for all employers. Before making a payment, employers should consider whether any conditions will be attached, for example would it be payable to staff who are still in probation or who have given (or been given) notice? Will it be paid pro rata to part-time employees?

Employers that want to explore this route to help their employees but cannot offer widespread lump sum payments could consider targeting staff who are most in need, for example by making a one-off payment to those earning less than a certain amount per year. This may raise further issues, such as who needs the most help, how much to give and will it be treated as a loan or a grant? It could also lead to dissatisfaction among employees who are not offered a cash payment, particularly if there is any suspicion of discrimination.

Alternatively, those businesses that ordinarily offer performance-related payments could consider providing all staff with a cash bonus, regardless of performance.

Employers need to bear in mind that any lump sum cash payment made to employees will be taxable.

Pay rises are, of course, an obvious way of helping with cost of living, but not every employer, facing their own challenges with increased costs in its supply chain, will be able or willing to provide substantial pay rises. In addition, the Bank of England has warned that offering pay rises will simply lead to further inflation, which in turn will accelerate the cost of living crisis.

Some construction companies have accelerated their annual pay rises. For example, Barratt brought forward its annual pay rise by three months this year to help its 6,000 employees.

Employers may also decide to carry out a pay audit to ensure they are paying the current market rate. This not only provides employees with the satisfaction that they are being appropriately remunerated, but also helps employers identify those pockets where pay could be increased, which in turn may help with recruitment and retention, and improve staff morale.

Many employers already offer loans to their employees (e.g. for travel season tickets) so offering hardship loans to employees would simply be an extension of this and an option for employers to consider as a way of helping their employees. Employers need to remain mindful of the fact that if the amount of the loan is greater than £10,000, then the loan becomes taxable.

If employers decided to start offering interest free loans to employees they would need to seek appropriate legal and tax advice. They would also need to ensure a suitable loan agreement was put in place and that there were appropriate clauses in contracts of employment stating that the employer has the right to make deductions from an employee’s salary for the repayment of an outstanding loan on termination of employment.

Another, more flexible option, is to pay salaries early if employees request it.

Employers can take steps to alleviate the financial pressure on their employees and in turn, help their employee retention rates. Employers primarily want to maintain a healthy and productive workforce and this is achievable if they take an empathetic approach. Many of the steps employers can take are either low cost or no cost, so should be considered where a pay rise is not possible.

Daisy Watson is a solicitor at Womble Bond Dickinson.

This article was originally published in Construction Management.