Gethin Nadin

Gethin Nadin

Chief Innovation Officer

An increase in the cost-of-living is being experienced by every single employee across the UK at present. Now is the opportune time to put employee discounts back in the spotlight to help people take back control of their finances − and ultimately prevent a negative impact on wellbeing.

 

The spiralling cost of living

The Covid-19 pandemic had a profound effect on the finances of UK households, with 50% saying that it increased the cost of living. Since January 2022, one in three employees say they are now struggling to keep up with their financial commitments - double what it was before the pandemic. But as the crisis worsens, this year is going to continue to have a large financial impact on employees − equal only to the situation workers found themselves in during the 2008 financial crisis.

Inflation is now at a 30-year high, and wages fell by 1% in real terms − which is the steepest decline since July 2014. Analysis shows that gas and electricity bills are set to rise at least 14 times faster than wages. The simple truth is that employees’ pay simply isn’t keeping up with the cost of living.

 

Salary squeeze

Of course, not everything has been caused by the recent pandemic; trajectories also showed that things have been heading this way for some time and since 2010, energy bills have risen at twice the speed of average wages. This complex set of issues is being further compounded by socio-economic changes across the globe, but the stark reality is that all employees are facing a financial squeeze regardless of their salary bracket.

With inflation peaking in May, those on low to middle incomes — which constitute almost all of most organisations’ entire working population — will be the hit hardest as they face skyrocketing living costs. Combine recent tax changes, including the new social care levy, and freezes in the personal allowance, and price increases of this magnitude have significant implications for living standards.

This means that an individual with an average income of 30,000 pounds in April 2021 who receives a net income of approximately £24k would need to see a nominal wage growth of 7.1% in April this year to maintain the same standard of living given in the forecast 5% annual inflation rates. This combination of slow wage growth and rising cost of living in reality will feel like a 4% pay cut for many average earners. Even for those organisations that are able to afford generous pay rises this year, employees are just not going to feel the benefit.

 

Which areas are going to be worse hit?

Research shows that while income from households are disproportionately hit by the increase in current gas prices, overall inflation rates are very similar across different salary brackets so even employees earning higher wages will have to significantly adjust their standard of living.

 

The effect on wellbeing

People may have adjusted their lifestyles during the pandemic, but it took its toll on their mental health. Being in lock-down meant there was no means of decompression after work, it was hard to find opportunities to de-stress or spend quality time with friends. The latest squeeze on the cost of living is likely to highlight the interdependent nature of our wellbeing and it is likely that this increased pressure and stress will drive down employee wellbeing overall. This can in turn have a knock-on effect on other things like mental health and quality of sleep.

 

How will the changes manifest?

If we take fuel as an example, our research shows that employees are spending almost 20% on transport and an employee’s average spend on petrol is £100 per month. This means that people are going to struggle with their general spending; paying more for things like recreation, hospitality and travel, and cutting out or cutting down on entertainment, which can have a negative impact on wellbeing.

 

So, how can employers help?

These may be societal and economic challenges at play that are essentially out of our hands, but there are certainly things that employers can put in place to ease the burden. While an obvious cost reduction lies in cutting pension contributions and benefits entirely, it should be discouraged as it could lead to a precarious position for employees in the future. So how can some of the rises in living costs be mitigated and what can employers do to support employees, so they don't have to make critical decisions that they later regret?

 

Giving back control

Discounts and cashback schemes are a good way to support employees. In fact, money off the weekly shop resonates a lot more with people now than it would have done at any point in the last 10 years and there has never been a more important time to get that message right. For a start, we know that behaviour change makes a huge difference and when people feel more in control of their finances, they feel more confident in their financial future. This helps them to make better financial decisions and take control at a time when things appear to be out of control. For example, a 10% discount may not seem like much but over the course of the year, it can make a real difference.

 

Changing people’s spending habits

Consumer spending habits have changed considerably over the last 10 years both in terms of what people buy and the technology used to facilitate purchases. Change is about more than helping people make the right decisions, it is about helping them sustain positive buying habits.

When it comes to implementing discount or cashback campaigns, there are elements that will help make the process more successful including:

 

  • Accessibility: whether it's single sign-on from a benefits proposition or an app on your phone, the fewer hoops employees need to jump through, the more engaged they will be.
  • Make it easy to understand. Avoid a complicated points systems or tricky calculations that people have to do before accessing a discount.
  • Streamline the journey to checkout. If there are five or six stages to navigate before receiving a discount, there is likely to be a drop-off. Make the process clear and concise.
  • Provide multiple ways to save. Consider gift cards, coupon codes, or getting cash back.
  • Send reminders and notifications. When people are reminded about the value proposition they are being given, they will reengage.
  • Sustain positive spending habits. While everyone is busy going back to work, it can be easy to forget that there's a proposition on offer and savings to be made. It's important to remind people to re-enforce positive habits and reintroduce the savings opportunity at a time that's right for them.

 

Engaging the differing demographics

One element that needs consideration is the spread of engagement with discount schemes across countries and demographics. For instance, employees in the Republic of Ireland are more willing to utilise cash back solutions than those in the UK. Similarly, younger and emerging demographics tend to be less engaged.

So how do we engage these demographics to keep it interesting – and keep their attention? Relevance is key here and matching the right offer with the right demographic can help engagement. For example, for employees interested in cashback, there must be cashback options available; and those interested in discounts need to be able to use gift cards or vouchers.

 

Concentrate efforts on one element

Rather than offering money savings across every purchase, just pick one piece. For example, everyone goes shopping so offer discounts at Sainsbury's, Tesco, or Asda. Employers can shape an offering around a family of four for example, and by slightly changing this shopping habit over time, it can help mitigate financial constraints further down the line. It is not about asking people to go and do 100 different things overnight. Changing habits takes time. Instead do little and often so that people realise that any saving, however small, will add up over the long term.

 

Reframing the cash-back cliché

There has been something of pushback against discounts and cashback in recent years mainly because economically things have been fairly good and a 5% discount didn’t seem much of an incentive to most people. Now we are starting to focus on the aggregation of marginal gains, adjusting to all the different ways that we spend money in order to mitigate some of these living cost increases.

Benefex for example has created an offer around a fuel discount which amounts to two or three pence off per litre. But when you reframe the offer, examining the pain point from a different angle, it works out at nine free litres of petrol or diesel over the course of the year. Just repositioning the discount to offer something that really engages people and makes them think differently can help longer term habits. This will provide value for employees’ daily, weekly and monthly expenditure which, unfortunately, is going to increase.

 

The effort will pay off

Once you start to make small changes they can gain momentum. A good example is the purchase of a new television. You see one on sale in a shop and want to buy it there and then. How can we make that process as easy as possible? In the past, you would have had to return home, log into your computer, or work intranet to access the discounts. Now it can be emailed or texted to you in the form of an E gift-card and can even be saved to Apple Pay and scanned at the checkout. It might only take three minutes to set up before you enter the shop, but it will save you £10 or £20 off your bill. This is the information that needs to be reaffirmed: the effort is worth the reward.

 

How can we encourage behaviour change?

It's hard to change behaviours, especially for those who don't use discount platforms regularly but creating relevance and value is the first step. Starting to build an awareness of the value proposition of the money they can save, albeit incremental, in employees’ heads will change the: “Why would I do this” mindset into “why wouldn't I do this?” mindset. Employers can then alter their offers from supermarket e-cards and fuel discounts to insurance depending on what is relevant for their employees.

 “The message is: the cost of everything is going up. Don't change the fact that you go for dinner. Don't change the fact that you've got your Just Eat on a Sunday afternoon. Don't change the fact that you've got a dress that you want to buy on ASOS. Just use a discount proposition, get your 10%, 15% or even 30% off. There's no change in the way in which you're spending the money. The only change is that you use the code first and you put one step before your impulse purchase. It is about those incremental gains that are compounded over the course of the year.” Megan Sowney, Wrkit Managing Director

 

How can employers encourage take-up?

How you set up and communicate your campaigns to employees is important and there are several key actions to undertake:

 

  1. Encourage newsletter sign up

The newsletter is an opt in but for those that do, we see that without exception that whenever we're reminding people about purchases that they can make, there is a spike in the engagement.

 

  1. Plan newsletters over the course of the year

Think about the things that people will be engaging with and when they will happen so that you can catch them at the exact moment they are likely to be spending or planning to spend money on. Remember you are not trying to drive revenue from these measures. You are providing value at the exact moment that people will be looking for something, and you can offer that all-important discount.

 

  1. Keep offers fresh

Using tools like Google Analytics to plan when people will be spending money can help effectively target your discounts. For example, in January when the pennies are tight, offering something that is more focused around supermarkets, would be impactful and relevant.

 

  1. Use the power of the roadshow

Roadshows are a great way to tell people about all the amazing value that they can get by just changing their habits and positioning. We can get anywhere up to 67% of people accessing the system after the roadshow because they've learned something they didn't already know and repositioned the message in a way that suits them. Ultimately, the more we can ease the burden of this cost-of-living increase for employees, the more employers will benefit with engaged workforce that is more able to manage their finance amidst the ongoing financial squeeze.

 

Gethin Nadin

Gethin Nadin

Chief Innovation Officer

Gethin is an award-winning psychologist who has been helping some of the world’s largest organisations to improve their employee experience and wellbeing for two decades. The last 10 years have been spent working as part of the senior leadership team here at Benefex where Gethin leads our thought leadership in the market.

As a frequent writer and speaker on employee experience and employee wellbeing, Gethin has been featured in Forbes, The Guardian, The Huffington Post and The Financial Times as well as all major HR, Reward and Pensions publications. Gethin has been listed as one of the world’s top 101 Global Employee Experience Influencers for the last two years running, is listed on the Employee Engagement Powerlist, is one of LinkedIn’s top global contributors and an Inspiring Leader 2021. Gethin is also a regular keynote speaker, Chair of the UK Government-backed Engage for Success Wellbeing Thought Action Group, a Key Stakeholder in UK Government Transport Employee Wellbeing KPI’s and a Fellow at the RSA.

In 2018, Gethin published his first book - the HR bestseller ‘A World of Good: Lessons From Around the World in Improving the Employee Experience’, which has gone on to inspire HR and Reward teams at some of the world’s best known brands. In 2022, Gethin co-authored his second book ‘Das Menschliche Büro - The Human(e) Office’ a collaboration between leading academics and workplace professionals from across Europe.