Rethinking policies to address in-work poverty concerns  

The financial pressure of the last two years has highlighted how precarious people's financial situations are. According to the Joseph Rowntree Foundation (JRF), one in eight UK workers are living in poverty. 

With inflation rates continuing to rise alongside living costs, the gap between incomes and expenditures is rapidly growing, putting even more people at risk of experiencing in-work poverty. 

Yet work should be a reliable route out of poverty for all. 

What is escalating in-work poverty? 

In-work poverty occurs when a working household's total net income is insufficient to meet its needs.  

Two of the biggest contributors to this have always been ever-increasing housing costs and the high cost of childcare. But some of the more recent contributors are fuel prices, gas and energy bills, as well as the rising cost of food. 

Short term loans are gaining prevalence 

In-work poverty means there is less of a financial buffer when there is an unexpected increase in expenses or outgoings, and this increases the likelihood of employees falling behind on their bills. As a result, short term loans are increasingly prevalent and are causing concern. 

Adding to this, a recent report, including data collected by the Competition and Markets Authority (CMA), suggests the average borrower will take out six payday loans a year.  

This means that payday loans create a constant cycle of debt for families with very little way out. 

What can employers do to help?  

With increasing financial pressures, employers have an essential role to play in reducing the risk of in-work poverty. 

Here are four things you can do to support and safeguard your employees. 

Revise business expense policies  

Employers need to be mindful of what they are asking their employees to do as they might be inadvertently putting additional financial pressure on them.  

For example, the cost of travelling to other business locations and the frequency of these trips need to be considered. 

While expenses are normally reimbursed, there is generally a period where the employee must cover these costs. Often employees will suffer in silence and may be too embarrassed to say they cannot cover these. 

Businesses can look to do three things to help with this:  

1. Introduce an expense cap.  

2. Consider advances for expenses incurred.  

3. Have multiple submission dates for expense claims. 

Fuel has also increased, so considerations need to be made for how much employees are being reimbursed for this. Are their costs being covered? Do policies need to be revised in line with new fuel prices? 

Introduce on-demand pay (down with traditional lending!)  

There is another alternative to help your employees, and that is with on-demand pay. By introducing this payment option, you help to safeguard your employees from the high-interest rates of payday loans and give them more flexibility when unforeseen costs arise. 

IRIS offers this to staff and recently partnered with Revolut, the global financial super app, which gives IRIS Cascade customers access to a portion of their salaries when they want and need. Not only does this create greater financial empowerment, but when an employee uses this feature, it is not recorded against their credit score, as they are accessing the money they have already earned.  

Read more about our partnership with Revolut here. 

A fair and liveable wage 

The rising price of essentials is pulling more people deeper into poverty. Over the last two decades the chances of households with two full-time workers being pulled into poverty has more than doubled from 1.4 per cent to 3.9 per cent.  

It may be time for employers to review what they are paying their employees – are salaries competitive and fair? Were salary increases in line with inflation rates? Do current salaries cover the cost of living?  

Paying a fair and liveable wage improves the living standards of low and middle-income families, reducing the risk of them falling into in-work poverty. 

This will also help your retention efforts.  

Oxford Economics estimates that the average cost of turnover per employee earning £25,000 a year or more is £30,614. This confirms that it costs a lot more to replace good people than it does to offer fair pay. Their skills and commitment are what will define your business. 

Workplace financial and wellbeing programs  

Poverty affects everyone differently and can often be circumstantial, making it harder for employees to identify when someone is struggling. This has become even harder to do as we shift to remote and hybrid working environments permanently.  

Implementing wellbeing and financial programs can help support employees when they need it the most.  

At IRIS we have Mental Health First Aiders to assist in identifying and understanding when employees are struggling, allowing us to offer meaningful support in response. We also offer a range of financial benefits to all employees.

If you already have these programs in place, communicate their value constantly, as it fosters a positive culture and gives employees comfort knowing they will be supported during tough times.  

Using HR engagement and monitoring tools such as Cascade and Staffology can also help employers gauge sentiment, identify those most at risk, and understand what your employees need in terms of support. This also removes the onus of an employee having to ask for help which is often avoided. 

Conclusion  

It is now more important than ever to reflect on how your employees are financially coping in the current economic climate. Employees need support, guidance, and help and businesses can minimise the risk of in-work poverty by providing this.