How can employers help relieve the strain of the cost of living crisis?

Rising prices for energy, food, rent and childcare have put many household budgets under pressure in recent years. Money worries do not stay at home: they can affect sleep, concentration, health and, in turn, performance at work.

Employers cannot solve the problem on their own, but there are practical steps that can make a real difference to staff and to retention. Here are seven ideas, along with the legal points to keep in mind.

1. Pay at least the legal minimum, and consider the real Living Wage

The National Living Wage is the legal minimum for workers aged 21 and over. From 1 April 2026 it is £12.71 an hour. The minimum rate is £10.85 for workers aged 18 to 20 and £8.00 for 16 and 17 year olds and apprentices. Paying less is unlawful, and HMRC can order arrears and impose penalties, and the government can publicly name employers who underpay.

The real Living Wage is a separate, voluntary rate set by the Living Wage Foundation based on the cost of living. The rates announced on 15 October 2026 are £14.10 an hour across the UK and £15.45 in London, and accredited employers have until 1 May 2027 to adopt them. Paying it is not a legal requirement, but many employers find it helps with recruitment, staff turnover and reputation.

2. Consider pay rises or one-off payments

Some employers have given pay rises above their usual budget, while others have made one-off cost of living payments, either as a lump sum or spread over several months. If you choose a one-off payment, remember that it is normally treated as earnings, so income tax and National Insurance apply.

Apply your criteria consistently and record your reasons. Treating groups of staff differently without good reason can lead to discrimination or equal pay claims, for example if part-time staff, who are more likely to be women, are left out altogether rather than paid pro rata.

3. Offer financial wellbeing support

Many people lack confidence in managing their money. Employers can help by offering access to sessions on budgeting, managing debt and understanding workplace pensions, or by signposting free, impartial services such as MoneyHelper and debt advice charities. Keep any support confidential and avoid giving, or appearing to give, regulated financial advice yourself.

4. Review benefits and discount schemes

Employee discount schemes can help staff save on everyday spending, particularly where they cover supermarkets, travel or household bills. Other benefits, such as cycle to work schemes, health cover or help with eye tests, can also ease pressure on budgets. Check how each benefit is taxed before you introduce it, and make sure it is offered fairly across your workforce.

5. Help with everyday costs at work

Small gestures can add up. Some employers provide free fruit, tea and coffee or subsidised meals, help with travel costs, or offer season ticket loans so staff can spread the cost of commuting. These steps also show staff that their concerns have been heard.

6. Support mental health

Financial stress and mental health are closely linked. An employee assistance programme can give staff quick, confidential access to counselling and practical advice. Just as important is a culture where people feel able to raise money worries or health concerns with their manager or HR without fear of being judged.

Train managers to spot signs that someone is struggling and to respond with support rather than going straight to formal procedures. A fair absence management approach matters here too.

Since 6 April 2026, Statutory Sick Pay has been payable from the first day of sickness absence, with no lower earnings limit, at £123.25 a week or 80% of normal weekly earnings if that is lower. Our article on the causes of employee burnout looks at related warning signs.

7. Be open to flexible working

For some staff, commuting costs are a significant drain on income. For others, working from home means higher heating bills, and for parents, childcare costs can be the biggest pressure of all. Flexible start and finish times, hybrid working, compressed hours or changes to shift patterns can help people manage these costs.

Since 6 April 2024, employees have had a legal right to request flexible working from their first day of employment. Employers must deal with requests in a reasonable manner, consult the employee before refusing, and make a decision within two months. Our guide on flexible working as a day-one right explains the rules in more detail.

Striking the right balance

Supporting staff can be difficult when businesses face their own rising costs. Few employers will be able to offer everything listed above, but even one or two measures show staff that you take their concerns seriously and help reduce the stigma around money worries. Our article on how HR leaders can support employees through economic uncertainty has further ideas.

If you are thinking about changing pay, benefits or working patterns, take advice before you act, because changes to contractual terms usually need employee agreement. Our employment law advice for employers can help you plan changes that are fair and lawful.

To talk through your plans, book a free 30-minute consultation or call us on 0141 471 9166.