Austerity Blues: Are They Impacting Your Employees

Posted in Employee Benefits and Wellbeing, Employee Benefits, Workplace Engagement

by James Malia on Jan 22, 2017 12:00:00 AM

Is the economic downturn impacting your employees?

It’s hard to always remain positive about the state of the global economy given the many political changes and shocks that have occurred throughout the last year. 

Brexit, the US elections, the potential for an early election in the UK and many more global events are expected to have large impacts upon the economy and may subsequently cause changes in currency values, global trade, interest rates, employment, and the rights that people currently have to live and work where they please.

Whether these changes are positive or negative in the long run, the fact remains that we're currently facing a great deal of uncertainty – and uncertainty is not good for anyone.

As an employer, manager or HR professional, you have a duty of care to those working below you, and it's important that you're able to support your staff as much as possible through difficult times. In order to do this, it's essential to understand the problems your employees are facing – as much of this uncertainty will largely impact those on lower incomes.

What does austerity mean?

Austerity means cuts to services combined with reduced tax increases in order to reduce the UK's financial deficit. Although Theresa May's government has gone to great lengths to state that there will be no additional austerity cuts, it doesn't mean that the severe cuts to public spending and welfare payments already imposed by Government are going away. Regardless of recent announcements, austerity is still a problem – one that is still taking its toll on the UK's workforce.

Cuts to public services have been designed with the intention of reducing the budget deficit. However, Oxfam states that rather than cutting the deficit, these cuts have resulted in “economic stagnation; the rising cost of living; cuts to social security and public services; falling incomes and rising unemployment have all combined to create a deeply damaging situation in which millions are struggling to make ends meet."

The impacts on employees


The economic turmoil of the past decade has been rising unemployment, although unemployment rates are currently at a record low, much of this has been the result  of a rise in self-employment and zero-hour contracts. Hundreds of thousands of public sector jobs have been cut, and with new jobs being created increasingly likely to be temporary rather than full-time positions, households that may once have had two adults in full-time employment may have one, or both, moving to less secure temporary or self-employed work.


Despite having the fifth-largest economy in the world, wages in the UK fell by 10.4% between 2007 and 2015.

Whilst the numbers in the bank account may appear to be higher, the amount that you can get for your money is now comparatively less.

Every twist and turn in the Brexit process seems to impact the value of the pound even further, with companies from a variety of sectors looking to raise prices in order to cope. From food to tech to cycling, prices are going up – and that's just a handful that have been announced in the past few months. According to the Telegraph, the poorest 8.3 million families in the UK are predicted to lose an average of £470 a year by 2020 as a result of these price rises.

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Many people in the UK workforce rely on benefits to support their wages – whether high rent means they need housing benefits, low wages mean they need working tax credits, or if child tax credits or child benefit help to support their children. In-work benefits have been slashed under government austerity policies, leaving many without a safety net.


The impacts of low wages are felt in more than just an employee's buying power. Guidance from Oxfam suggests that workers on low wages experience increased stress, low self-esteem, an increased tendency toward unhealthy behaviours and worse health overall.

Furthermore, uncertainty causes stress, and stress is a leading cause of ill health. Figures from the Health and Safety Executive (HSE) state that in 2015/16, "stress accounted for 37% of all work related poor health cases and 45% of all working days lost due to poor health."

Research from the OECD has found that the economy can affect health in three major ways. However, it is important to note that these effects aren’t universally negative.

  • The stress mechanism – employment uncertainty may cause increased stress due to fears of becoming unemployed.
  • The effect budgeting mechanism – when people have less money, they're less likely to eat healthily, go to the gym, or spend money on things like over the counter medicine
  • The frustration-aggression mechanism – a feeling of unfair loss can lead to an increase in incidences of violence. With budget cuts putting greater pressure on household finances and job uncertainty greater, people are more likely to feel frustrated, which may in turn result in anti-social behaviour

How can employers help?

So, these are the problems your employees may be facing, particularly those on lower incomes. Stress, financial uncertainty, falling job security, and less support from the government. What can you do to provide a helping hand? Particularly when these same issues may be affecting company revenues too?

The key is a shift away from direct financial support, and towards lifestyle benefits. This can be a difficult process. With employees struggling financially, it's understandable that they will see cold, hard cash as the most important kind of recognition for their efforts.

However, moving towards offering lifestyle benefits that can help employees save money – rather than providing them with money – can incur costs that are a fraction of an annual pay rise, yet offer savings and provide support with a net value far greater than what the raise would actually have been. Childcare, access to counselling, and assistance with day-to-day costs such as transport can all help provide that all-important safety net.

Furthermore, when combined with simple changes in company culture the results can be magnified. Ensure you show employees that they are valued by focusing on improving communication between management and staff, particularly when it comes to praising employees for a job well done and you can help your employees at a time when they need it most.

For more advice, be sure to read our whitepaper on Maximising Employee Rewards in the Current Economic Climate. Our employee recognition and motivation experts expand greatly on the topics we've discussed in this blog, providing guidance and practical solutions for supporting your employees through times of economic uncertainty.

Maximising Employee Rewards


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