Sorry kids, Santa’s sack might not be so full this year. According to new research, an alarming 88% of U.K. workers are unsure whether their current role can sustain them financially during this economically uncertain period.
Further, productivity platform ClickUp’s study, published in late November, calculated that 26% of Britain-based employees are planning to switch jobs because of the cost-of-living crisis — inflation hit 11.1% in October, a 41-year high — and the desperate need to earn more money.
Respondents identified surging energy bills (31%), the rising cost of everyday goods (30%), and wages failing to keep up (16%) as the top reasons for tightening the purse strings. The data suggested that the information technology and hospitality industries would likely face the most significant job churn, with 39% of their respective workforces wanting out. Not far behind are those currently working as drivers (36%), in business services and construction (33% respectively.)
“With the highest inflation rate among the G7 countries [consisting of Canada, France, Germany, Italy, Japan, the U.K and the U.S.], there’s no doubt almost every working family in the U.K. is feeling the pinch,” said Alan Bradstock, a senior insolvency practitioner at Company Debt in London. “Many have no choice but to seek higher paid work.”
Citizens Advice, a U.K. charity, said the number of employed people seeking crisis support between July and September jumped 150% compared to the same three-month span two years ago. “Every day, our advisers hear stories of people skipping meals, going without essentials, and then coming to us when they simply can’t cut back anymore,” said Morgan Wild, the charity’s head of policy. “This cannot continue.”
It’s a similar situation in the U.S., the new iCIMS 2023 Workforce Report indicated. Of the 3,000 workers quizzed for the talent cloud company’s research, conducted in September, 80% don’t feel secure professionally or financially.
“The cost-of-living crisis will significantly impact employee turnover as people will look for higher-paying jobs to try and offset the higher costs they are faced with,” said Natasha Wallace, ClickUp’s international people operations partner.
So what could and should employers do to halt the exodus?
Matching competitors’ pay helps, said Wallace, but it isn’t an option for many organizations that are also financially vulnerable. However, there are other ways to invest in employees, she added. “Financial and well-being workshops, enhanced benefits, and career development can all help manage the concerns around the cost-of-living crisis.”
Matt Clementson, head of U.K. at SAP Concur, a travel and expenses software services firm, pointed to its own research that showed organizations are also under pressure, so bumping salaries might not be a viable option. “While concerns around personal finances are rising across the U.K., tensions are increasing between businesses and employees as both leaders and employees move to make savings,” he said.
The survey found that 48% of employees said their employer encouraged them to work from home to save on office electricity and heating bills. Meanwhile, 37% of workers said they would spend more time in the office to reduce energy consumption at home should their employer not adjust the expense policy to meet the rise in inflation.
Sally Winston, head of employee experience solutions strategy in EMEA for global employee-experience firm Qualtrics, argued that the current financial situation should spur conversations between employer and worker. “There is a real opportunity to open up conversations about what employees need, and the right listening tools can capture this data safely and confidentially,” she said. “Starting conversations, however awkward or difficult, about what employees want from their career and need financially is crucial.”
She added that spending time to capture and act on the feedback would help companies retain talent and make employees feel supported, valued and motivated to focus on doing their best work.
Deepening workforce disparities
Nicola Hemmings, head of workplace psychology at Koa Health, was less optimistic and worried that the current circumstances may broaden the inequality gap. “The effects of the cost-of-living-crisis will not be borne equally,” she said. “People on higher salaries will be insulated from the most concerning effects.” Whereas those in precarious employment or at companies where wage growth has stagnated will likely be more stressed as “they worry about overfilling their car or putting food on the table,” added Hemmings.
Frank Weishaupt, CEO of Owl Labs, a company that makes 360-degree video conferencing devices, agreed. “Similar to the pandemic, the cost-of-living crisis is widening the disparities across the workforce,” he said. Owl Labs’ proprietary data found that financial inequality threatens to cause deeper divides across an increasingly multi-generational workforce if companies fail to take action and implement the necessary support for struggling younger workers.
The research showed that Gen Z workers in the U.K. are the most nervous about costs, with over a fifth (21%) recently switching job roles for a higher salary. “A further 37% of Gen Z are actively looking for another job with better pay,” added Weishaupt. “In contrast, Baby Boomers are the least anxious with nearly half (45%) of workers aged 57 to 75 years-old confident about their current level of job security.”
Meanwhile, the ripple effects of the cost-of-living crisis on people’s desire to switch to higher-paying jobs are also more visible among frontline workers, compared with those in the corporate sector.
Piers Hudson, senior director of Gartner’s HR functional strategy and management research team, said his company’s data showed that people in desk-based jobs are keener to stay in their jobs as business confidence has dropped. He admitted that those at the bottom of the pile are likely to suffer the most. “Small adjustments in the cost-of-living and salary levels are likely to hit that group much harder,” he said. “The data shows, if I’m honest, a very divided workforce.”
Compensation not enough
Hudson sympathized with both employers and employees. He said that for HR professionals, any potential attrition problems — well-being, salary, career progression — are “not insurmountable on their own.” The bigger problem is that these challenges are interlinked and increasingly acute. “The variety [of problems] makes it difficult for companies to react in a scalable way because everyone’s circumstances are unique to them.”
Jim Bartolomea, svp and global head of people and places at ClickUp, took a different angle. He urged those thinking about moving to better-paid jobs not to be too hasty. “It can be risky. People should always consider their motivation to change roles, especially during difficult economic times.”
Besides, some jobs require additional — and initially hidden — expenses, like commuting costs if heading to the office or factory is a prerequisite, or spending more on energy bills if a new role is remote. More money might be the biggest draw, but there are numerous elements to add to the balance of pros and cons.
“Taking a job just for a significant pay rise doesn’t factor in the other benefits that round out the employee experience, such as a wellness stipend, professional development budget, paid time off, and more,” added Bartolomea.
Notably, global human capital management technology company Ceridian’s Pulse of Talent Report, which surveyed more than 1,500 U.K. workers, concluded that compensation alone is no longer enough to retain employees. Indeed, only half of the respondents (50%) felt committed to staying with their current employer for at least three to five years. However, 85% of employees with a clear career path said it made them more committed to their employers.
“Our research clearly shows that employees have commitment issues with their employers,” said Susan Tohyama, CHRO at Ceridian. “There is an opportunity for employers to counter this trend with their long-term commitment to employee work/life, career flexibility, and engagement.”
She added that this includes opening up opportunities for employees across an organization while giving them greater control over where, when, and how their job gets done.
Similarly, Kara Yarnot, vp of strategic consulting services at HireClix, a Massachusetts-headquartered recruitment firm, called for employers to better advertise internal roles to employees. “It is often easier for individuals to find new roles at other organizations than inside their current company,” she said. “If employees believe their best options are with you, they are likely to stay and grow their careers.”
Again, it comes back to communication, sitting down with workers to learn about their fears and ambitions, and mapping out potential paths for development — preferably at the organization rather than elsewhere. “To achieve an environment where people can grow their careers, ensure all open positions are posted for employee awareness, allow employees to express interest in a new role without notifying their current manager, pay the same rate you would if you hired an external candidate, and allow the employee to transfer to the new role promptly,” said Yarnot.
Additionally, when an employee is not selected for a role, it provides another opportunity to engage with them and offer guidance on how to be the best candidate next time or point them to other positions where their skills and competencies may be a better fit. “Strong internal mobility processes and practices lead to greater retention,” added Yarnot.