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October 4, 2022

Companies asked how they are supporting employees through the cost of living crisis

Investors have written to large listed companies for reassurance they are supporting their lowest paid employees during the current financial squeeze.

As the UK struggles through a cost of living crisis, CCLA Investment Management and the Church Investors Group, which represents institutional investors from church denominations and church-related charities, have written to 100 of the largest publicly listed companies in the UK, asking them what action they are taking to support their lowest paid employees.

Companies to receive the letter include the likes of AstraZeneca, BT, HSBC, Shell and Unilever. Together, they have a combined market capitalisation of £1.7tn and employ around 5mn people, excluding contractors such as cleaners and security services that work on their sites. The two investment firms have combined assets under management of nearly £39bn.

The letter asks companies if they have taken steps to support their lowest paid employees through the upcoming winter, and asks those that have done so, what proportion of the workforce will be eligible for company initiatives and if third-party contracted staff will also be entitled for assistance. Companies with no plans to support staff are asked to explain their decision.

The letter references a survey by PwC, which found that 83 per cent of reward specialists at large companies are taking action or considering ways to help employees during the current crisis. The most popular ways in which large businesses were supporting their employees with rising inflation include focused pay increases for essential workers (53 per cent); additional pay reviews (51 per cent); and one-off bonuses (40 per cent). 

Some organisations (15 per cent) are implementing non-monetary interventions, such as increased staff shopping discounts, support with home insulation, financial wellbeing programmes and employee hardship funds.

Inequality carries risk

Both CCLA and the Church Investors Group consider growing inequality to be a systemic risk. They are currently updating their voting guidelines to say they will oppose executive pay rises next year if businesses have not moved to shield their lowest paid workers from the rising cost of living.

CCLA chief executive Peter Hugh Smith said: “As investors, we believe that it is important that businesses step up to support their employees in this time of need. It is not only the right thing to do, but the smart thing to do financially, as it will build stronger companies, happier more productive employees and a more resilient financial system.”

Soaring inflation, increasing energy prices and low wages have all contributed to the cost of living crisis in the UK. According to a report by the House of Commons Library, consumer prices (measured by the Consumer Prices Index) were 9.9 per cent higher in August 2022 compared to the prior year. The report highlights an increase in “the cost of consumer goods, underpinned by strong demand from consumers and supply chain bottlenecks”, as one of the main causes of rising inflation.

Rising energy bills have also sparked increased living costs. Earlier this year, regulator Ofgem announced the energy price cap would increase by 54 per cent resulting in an average household bill of £1,971 from April 1 2022, and later announced a further 80 per cent increase to £3,549 from October 1 2022. 

However, on September 8, prime minister Liz Truss revealed a new energy price guarantee would instead be introduced on October 1, set at £2,500 for the average bill for the next two years. Though the UK government stepped in to bring down the price cap, UK households will still be paying much more for heating this winter than the last.

The UK government has also been criticised for neglecting those on a low income and focusing efforts on making the rich richer in the hope that wealth will trickle down to the rest of the economy. A “mini” Budget presented on September 23 by chancellor Kwasi Kwarteng outlined controversial policies that included major cuts to stamp duty land tax, the removal of caps on bankers’ bonuses, and scrapping the 45p income tax rate on earnings of more than £150,000 a year.

But in reaction to major market fluctuations and disagreement within leading Conservative party, on Monday Truss reversed her decision to cut the top tax rate, with Kwarteng saying the policy had become a “distraction from our overriding mission to tackle the challenges facing our country”. 

Low-paid workers hit hard

Last month, a Living Wage Foundation survey found that for 78 per cent of workers paid below the real living wage (3.7mn workers nationally) the cost of living crisis was the worst financial period they have ever faced.

Over half of low-paid workers – 56 per cent (2.7mn) – reported they had used food banks in the last 12 months, and 63 per cent (1.7mn) of low-paid food bank users said their use had increased during this time.

Additionally, 42 per cent (2mn) said they were now regularly skipping meals due to financial reasons; 32 per cent (1.5mn) reported being unable to heat their homes due to financial reasons; and 24 per cent (1.2mn) have had to take out a payday loan to cover essentials.

Living Wage Foundation director Katherine Chapman said: “Everyone is feeling the pressure from soaring inflation, but our polling shows that low-paid workers are being hit harder than most.” 

She said the shocking findings “bring to life what it is like to be paid less than a real living wage during a cost of living crisis”, adding: “It’s more important than ever that those employers who can, step up and provide a wage based on the cost of living.”

Photo credit: Bloomberg

A service from the Financial Times