There has been much talk through the media about a cost of living crisis. I am a HR manger and have been approached by a number of employees in relation to this issue. They have spotted that a number of companies have provided one-off payments in response to increasing living costs. How do I handle it?

This ties in with the issue of pay rises which can be a very contentious issue when it comes to dealing with employees. Some employees may find the issue quite sensitive and will be reluctant to raise it with their employer. For others however, this can lead to deputes or result in valued employees leaving the organisation.

As a starting point, the employee’s contract of employment will usually address the issue of pay rises. It is quite common for the contract to set out that there will be a pay review after a certain period, such as each year of employment. The clause wording will usually provide the employer with some degree of discretion. At the very least, it would certainly be advisable for the employer to approach any pay review in good faith. Any increase in pay may be linked to company or individual performance.

By simply ignoring a pay review clause or failing to offer any form of pay rise over a lengthy period, employers run the risk of creating unrest within the workplace. This can result is employees raising internal grievances or leaving to join competitor organisations.

It is important for employers to note that where any percentage increase in pay is given, this will generally be taken to be a permanent amendment to the employee’s contract. Some employers may also use bonus-related incentives in order to keep their employees on board. The advantage of bonus type payments is that they can be made on a ‘one off’ basis and do not necessarily tie the employer down permanently. Large companies may use share option scheme as a means of ensuring that their employees are invested within the company.

In relation to the current cost of living crisis, many large employers will formally recognise trade unions. In such circumstances, the employee will usually have a clause in their contract to say that any collective agreements will apply to their own terms and conditions of employment. The negotiations are then left open to trade union representatives. There has been a lot of news in the media recently in relation to strike action, particularly within the rail industry.

A number of employers have tried to address the cost of living crisis by providing their employees with ‘one off’ payments, meaning that there are not necessarily committed to paying increased salaries year after year. To keep staffing costs down, some companies will make these payments based on certain conditions applying. For instance, it may be that the payments are only made available if the employee earns under a certain amount or has been with the company for a certain period of time.

Employers can often use any pay review period sensibly as a means of obtaining employee feedback. By listening to and considering employees views, employers can help to ensure that employees remain engaged. Where a company is simply unable to afford a pay rise across the workforce, they may wish to consider alternative incentive schemes such as offering additional holiday allowance or implementing a bonus scheme.

If you are a HR manager or business owner and are experiencing pay related issues, then feel free to contact a member of our employment team.