Should you give your staff a one-off "cost of living" bonus?

HSBC and Virgin Money are giving staff a one-off payment to help with the cost-of-living crisis. But with no end to the recession in sight, perhaps businesses should look at longer-term solutions to financial wellbeing.

by Orianna Rosa Royle
Last Updated: 04 Aug 2022
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Down to business

Amid the fallout from the pandemic and Ukraine conflict, the cost of living is spiraling out of control. Britain is experiencing a 40-year-high inflation rate of 9.1% and the price of goods like fuel and food is soaring. 

To help cushion the blow, HSBC has announced it will give around 99.5% of its workforce (4,182 employees) a one-off payment of £1,500. It follows in the footsteps of Virgin Money whose workers on £50,000 or less will receive an extra £1,000 in their August pay packet. 

Virgin Money’s chief people and communications officer, Syreeta Brown, tells Management Today that the incentive is in line with its purpose of “making you happier about money”.  

She says: “We know that to achieve this purpose, we should recognise financial wellbeing as much as mental wellbeing. We also know that many people are experiencing additional pressure on their finances due to the rising cost of living, so now is the right time to offer the vast majority of our team a one-off payment that will make a real difference."

But is throwing money at the problem really “financial wellbeing”? 

Poor financial health is characterised by money worries, debt and a lack of planning for the future. With experts predicting energy bills could rise to £500 a month by the new year, it’s clear that £1,000 won’t make a significant long-term impact on people’s financial positions. 

Employers looking to improve employee financial wellbeing therefore can't just rely on throwing money at the problem and hoping their lowest-paid workers will be out of the water next year.

With no clear end date or solution from the Government to the cost of living crisis, Genpact’s CEO Tiger Tygarajan says the money might be better placed in training and upskilling staff, because this is beneficial in the long run. As well as giving workers the training they need to succeed in an increasingly digital world or to bag a promotion, businesses could educate staff on how to maximise the money they already earn. “Even some of the smartest, well-educated people don't understand the impact of compounding,” Tygarajan adds.

“We all know people who can do more with the pay they get, versus others who can't,” Amrit Sandhar, founder of The Engagement Coach says. During the pandemic for example, people who were money savvy maximised their income by claiming tax relief for working from home. “This is the type of input and advice organisations should provide,” he says.

Cost-effective approaches that could add real value to employees' financial wellbeing range from how-to guides on budgeting, debt management and pensions, to video workshops and support lines, ideally with a permanent internal finance expert. 

While it shouldn’t solely fall on employers to fill a financial knowledge gap, organisations that are splashing out on incentives like beer fridges to entice their workers back into the office could see a better return on employee engagement amid a recession if they spent some of that effort educating their staff around finance. 

Organisations “that genuinely want to look after their people” should help employees maximise their existing salaries and benefits, by making this training a central part of their wellbeing incentives. “That feels like the approach of a compassionate organisation that really wants their employees to do well, as opposed to installing a ping pong table,” Sandhar adds.

On balance

Really, being able to take a long-term view on finance is a privilege. Understandably, workers on a low income are unlikely to welcome handy tips on the best ways of investing for the future. Especially those who are relying on food banks and rationing heating, while the business they work for makes record-breaking profits.

Unite, the union representing Rolls Royce workers, recently snubbed a £2,000 one-off payment from the firm to around 14,000 of its workers because the offer “falls far short of the real cost of living challenges which our members are experiencing.” 

For businesses that can afford it, offering generous pay rises would go a long way. If that’s not feasible, a one-off payment certainly won’t go amiss. For some, it could be the difference between paying their bills or landing in debt in the coming months. Meanwhile, it will increase engagement with those who aren’t financially struggling but are feeling the pinch.

“Businesses have a responsibility to support employees during turbulent times,” Visier’s Ian McVey, MD EMEA stresses. But there are many ways of increasing workers' money in real terms, in addition to or instead of a one-off bonus. Giving workers the flexibility to choose when and where they work, could save them from the eye-watering cost of train tickets which are predicted to increase by nearly 12% in January. Meanwhile, providing breakfast or lunch probably won’t excite staff as much as thousands of pounds in their pocket now, but it ensures that they are fed at the very least. 

McVey adds that “keeping abreast of employee sentiment using data can paint a clearer picture of how employees feel about the cost of their commute, flexible working, cultural perks and learning and development initiatives”. 

Ultimately, if businesses want to know if a one-off bonus will help staff with the cost of living crunch, the best bet is to ask them. 

Image credit: Ashley Cooper via Getty Images