6 minute read
Employee wellbeing
The construction industry and the cost-of-living crisis
Pay levels in the construction industry often vary widely from one area of expertise to another, yet workers of all grades may soon be feeling the financial pinch as a very real cost-of-living crisis takes hold across the United Kingdom. So, what’s causing this problem, how bad might things get, and why is this a problem for employers too?
Causes?
The origins of the crisis are many and varied, yet the two key issues are taxation and the cost of both energy and fuel.
In early 2021 Rishi Sunak, the Chancellor of the Exchequer, announced a 5 year freeze on many personal tax thresholds. Later in the year he announced the introduction of the new Health & Social Care Levy (which starts life as a National Insurance increase in April 2022). Both these announcements will place significant pressure on household incomes this year.
And in recent months the wholesale cost of energy has escalated rapidly too. The forecourt prices of petrol and diesel remain near record levels, and the cost of energy for household and workplace usage continues to climb also. It should also be noted that the cost of both fuel and energy also has a knock-on impact to the price of virtually all other goods and services to some extent. Or, to borrow from Sky News’ Ed Conway;
“an energy crisis is an everything crisis.”
Inflation and costs
All of which suggests that inflation will continue to climb in the months ahead. At the time of writing the headline inflation figure (based on the Consumer Prices Index (CPI)) is 5.4%.
Yet many readers of this article will be more familiar with the older measure – the Retail Prices Index (RPI) – which includes mortgage costs and is higher still at 7.1%. This is the highest rate of inflation for some 30 years, and looks set to go higher still in the months ahead. Of course these are only average numbers, and many households with low incomes are facing far bigger increases in their essential everyday spending.
And whilst there is some evidence of increased pay in many sectors – including construction – most pay awards are well below the current level of inflation. So in real terms workers will have less money available for discretionary purchases. Indeed the think-tank The Resolution Foundation conclude that a typical household will experience an income hit of more than £1,000 from April this year.
Is this a problem for employers?
So these are clearly challenging times for household finances. But is this also a problem for employers in the construction sector?
Evidence suggests that employees with money worries are unlikely to be as productive as employers would like. For example, a report published by the Financial Inclusion Alliance in January 2020 suggested that employees with money worries are: w 5 x more likely to have troubled relationships with colleagues at work w 6 x more likely to produce substandard quality work than their colleagues. w 7 x more likely to have lower productivity or not finish their daily tasks than their colleagues w 8 x more likely to be experiencing sleepless nights that are impacting their state of mind at work and cognitive capacity
These findings could be a problem at any time, but are perhaps far more of an issue as employers in the construction sector look to accelerate away from the challenges of the last two years.
If employees are understandably concerned about their financial position to such an extent that it affects their performance at work then this could very well lead to unforced errors, substandard workmanship or simply a lack of drive to complete tasks on time. All such issues have a knock on effect for the employer and consequently their PI insurers, for example if an un-focussed employee omits a design detail that subsequently causes a project to halt whilst a solution is found, it will very likely lead to claims from third parties for damages and resultant delay costs. This not only has a cost to the employer in terms of the excess under their PI policy but also the potential for increased future PI premiums and damage to reputation.
Ian Chapman, Associate Director, Legal,
Technical & Claims, Financial Lines Group
How can employers help?
In an ideal world an above-inflation pay rises would clearly help many workers. Yet many of the same inflation concerns are also posing genuine cash flow and/or profitability problems for employers too.
It follows that lower cost alternative solutions may have to be considered.
Other options
A good starting point for employers with limited financial resources might be to formulate a plan that will, at the very least, signpost workers towards some practical support and assistance.
The support offered will vary, but options to consider could include debt counselling services provided by Employee Assistance Plans (EAP), signposting to debt charities, and possibly workplace finance solutions too.
And ideally overlaying all of these options should be the availability of financial education sessions, which can be delivered very cost-effectively via pre-recorded video content placed on the employer’s intranet, website, or employee benefits platform.
The reality is that very many construction workers and their households will be feeling the financial pinch this year, and it’s in everyone’s interest for employers to take some action to help their employees – and their organisation – to weather this potentially significant employment issue in 2022 and beyond.
For more information on any of the above topics, please speak to your usual Howden Consultant, or alternatively visit www.howdengroup.co.uk.
Author: Steve Herbert is Head of Benefits Strategy at Howden Employee Benefits & Wellbeing
On the 16 December 2021, the Health and Safety Executive (HSE) published statistics that cover work-related ill health, non-fatal workplace injuries and enforcement action taken by HSE, in the 2020/21 period.
HSE publishes annual work-related ill-health, injury and enforcement statistics for 2020/21 The statistics include two new estimates, developed to measure the impact of the coronavirus
(COVID-19) pandemic.
The pandemic has affected certain data collection and impacted on assessment of trends, therefore there is no new data on working days lost and the associated economic cost for 2021. It is not known whether some of the people reporting a coronavirus-related ill health condition would have developed and reported an ill health condition if prepandemic working practices had continued. 1.7 million It is therefore not possible to assess the scale of work-related ill health independent working people suffering from a work-related illness, of which... of the effects of the coronavirus pandemic. HSE’s Chief Executive, Sarah Albon, commented: “These annual statistics are important to give us a clear picture of the health and 822,000 safety risks faced by workers in the Great Britain and help to inform the measures workers HSE, employers, policy-makers and workers suffering work-related stress, themselves need to take to ensure everyone depression or anxiety can go home from work safe and well. 470,000 workers suffering from a work-related, musculoskeletal disorder “The 12-month period in question coincides with the first national lockdown and the unprecedented challenges of the pandemic. There have been significant impacts on the labour market, which is reflected in our reporting. 93,000 “We worked differently too in responding to the challenges posed by the pandemic, workers advising across Government, helping suffering from COVID-19 which, to shape guidance for businesses and they believe may have been from exposure to coronavirus at work implementing our Covid Spot Check programme to ensure workplaces were kept as safe as possible.”
Key figures for Great Britain (2020/21)
2,369 mesothelioma deaths due to past asbestos exposures (2019) 142 workers 51,211 injuries to employees killed at work reported under RIDDOR 441,000 working people sustained an injury at work according to the Labour Force Survey
