How have UK employees responded to the cost of living crisis?

BSIA members Wagestream share their latest report...

New research commissioned by Wagestream says that many of the steps employees have taken to make ends meet have had a destructive impact on their individual wellbeing.

The recently published State of Financial Wellbeing: The Cost of Living Crisis Report 2022 found that the current economic crisis has contributed to a woeful increase in financial stress. Close to all UK employees (96%) have seen their living costs rise and, as a result, almost three-quarters of UK workers (72%) are worrying about money at least once a week.

The impact of all this worry is substantial - the mental health of the UK’s workforce is declining. Amongst those surveyed, a number of toxic and damaging symptoms were reported. 44% of people said they were affected by stress, 35% reported trouble sleeping affecting  and upsettingly a fifth (20%) of people said they had lost self-confidence.

People have been forced to act

It’s increasingly difficult to go a single day without feeling the squeeze of rising costs. If we manage to, we’re soon reminded of the devastating effects by yet another gloomy headline confronting us with the current crisis or dark thundercloud of a recession looming ahead.

It’s unsurprising that Wagestream’s report says that employees have had to take specific financial actions in response. The most common step taken by 70% of the workers surveyed was reducing spending.  Over a third (39%) of workers have reduced the amount they save, while 20% have increased their use of credit such as credit cards and overdrafts. Some (7%) have taken measures that could compromise their financial security in the long-term, like reducing or stopping their pension contributions.

Is it a lose-lose environment?

Of all the disheartening insights covered in the report, something that really struck a nerve with us was learning that taking any action in response to rising costs is associated with an additional 7.8 days of money worry on a monthly basis.

Taking any action was also associated with an increase in anxiety felt, apart from negotiating rates or switching providers to reduce bills. That said, anecdotally, the stories from those who have gone through the effort of change suppliers would argue that it’s a frustrating process in and of itself - particularly if you are time poor, which most working people in today’s always-on world are.

Close to a third (27%) of employees recently responded to rising costs by dipping into their savings because they desperately needed to.This led to an average 5% reduction in whether  life felt worthwhile suggesting that there’s a fundamental and timeless link between savings and long-term financial wellbeing.

Worried about financial wellbeing at your organisation?

The evidence is in. Financial wellbeing, or a lack of it, is a corrosive force within your organisation. Poor financial wellbeing negatively impacts mental health and this has knock-on effects on the individual. One of the many knock-on effects is on performance in the workplace. Many employers already recognise that poor mental health reduces effectiveness at work: every job requires presence, focus, sustained attention and some form of interpersonal contact and poor mental health reduces our ability to perform in each of these domains.

Another consequence is absenteeism and presenteeism. A total of 70 million working days are lost each year due to absenteeism because of mental health problems, with the Dutch National Institute for Budgeting Advice (DNIB) adding that staff with financial stress tend to take on average seven extra sick days annually.

For more information about the key issues affecting your staff and the critical need to put measures in place, read the full report here.