New ideas to ease cost-of-living pressures for employees

Garreth Hanley:
This is INTHEBLACK, a leadership strategy and business podcast brought to you by CPA Australia.

Aidan Ormond:
Hello, welcome to INTHEBLACK. I'm Aidan Ormond, and today we're going to be talking about how businesses can help their staff with cost-of-living pressures without pay increases impacting their bottom line. Our guest today is Kylie Green. Kylie is the Managing Director of Reward Gateway’s Asia-Pacific region, and for over 20 years she's worked with leading companies to help them use technology to take their employee engagement strategy to the next level. Welcome to INTHEBLACK, Kylie.

Kylie Green:
Thanks for having me, Aidan.

Aidan Ormond:
So Kylie, you are an employee engagement specialist, but we're talking about cost-of-living pressures and how businesses can reduce these pressures for their employees. So, tell me, what's the link between employee engagement and financial pressure?

Kylie Green:
Yeah, it's really interesting, Aidan. The link is quite significant between engagement and financial pressure. And it really comes back to Maslow's hierarchy of needs. So, I don't know if you remember that from from way back, but we certainly see it regularly in feedback from employees. If you think about the base of Maslow's hierarchy of needs, it's all about safety and security and at the moment cost of living pressures is meaning that there is significant pressure on the financial wellbeing of employees.

In fact, we did a workplace engagement index report recently and it covered a thousand HR leaders and a thousand employees across 14 different industries and over 53% of employees admitted that the cost-of-living pressures was negatively impacting their work on a day-to-day basis, and 64% believe that their employers should do more. So people are absolutely expecting employers to do more to offset the inflationary pressure and the rising cost of living. So what we're seeing is if companies are not able to address the financial pressure and actively work to combat it, then employee satisfaction and engagement will naturally be impacted. Financial wellbeing is absolutely a top priority for employees in 2024 and they want their companies to focus on it.

Aidan Ormond:
We'll link in the show notes to that report, Kylie. And you've done a number of reports, and one of them, which I looked at, which is 15 benefits to truly make a difference in your employees' lives.

Kylie Green:
Yes.

Aidan Ormond:
Has some really stark figures. I'll give you one here. 55% of Australian workers are worse or not better off financially over the last two years and a whopping 81% are concerned about cost of living and inflation pressures. Tell me, are these numbers, are they flat across generational groups or are some doing okay while others are struggling?

Kylie Green:
Yeah, we're absolutely seeing the impact of these financial pressures as you touched on in the report and even today some research reports came out that the cost of groceries has increased by 30% over the last two years. There's really significant impacts that employees are having and and what we're seeing is that while all generations are concerned around cost-of-living, Gen X from the research have been the most concerned. 85% of Gen X are concerned and we're not surprised by those results when you consider the amount of Gen X employees that are sitting in the mortgage belt of Australia.

It's a significant impact and pressure. We're also seeing Gen Z, still very concerned with 68% of Gen Z employees very concerned about cost of living and really struggling to meet their financial commitments. So while high across all generations, we're seeing variances in the amount of financial pressure due to both home ownership and care responsibilities. So, it's definitely a challenge that all employees are facing, but particularly we are seeing the greatest impact on those that are having either rental or mortgage pressure, particularly creating a greater degree of impact on their financial wellbeing.

Aidan Ormond:
Even though inflation has actually gone down, it's still that cost of living that we're looking at. And while all of this pressure has an impact on employee engagement, this also transfers to the bottom line as many businesses are also under pressure too. And some might not be able to give their people a pay rise, which is fair enough. But do you see another option for businesses? Can you explain what the report describes as ‘the changing narrative of benefits’ and how they can help employees while lessening the cost to businesses?

Kylie Green:
Yeah there's definitely a change in employees’ expectations aid, and I think one of the things that we're seeing is that employee benefits are becoming a baseline expectation for employees and one of the things that employees are absolutely reaching out to their employers and expecting them to do more. So, we have a higher rate of expectation than what we've seen before and in many cases for employers they are still operating in quite a talent-short market, and even where they have perhaps some softening in the demand for talent, they're seeing that they need to drive productivity and performance at higher levels than before.

So there's a lot of onus on businesses to be able to address this and be able to look after both the pressure and I guess in some ways the being the sandwich in the middle that many organisations face, where their employee expectation is at an all-time high under cost of living pressures but the reality, the commercial reality, of the budgets and to your point around pay rises is only limited. So, there is a real squeeze in the middle that organisations face and what that means is that for many organisations they need to be more innovative than ever before to be able to change the conversation, to be able to work out how they can best support employees and their financial wellbeing in a different way. And so what we're seeing is that organisations are recognising this challenge and they're addressing it head on and particularly innovative organisations are doing things like introducing an employee discounts program as a cost-effective addition to their total reward arsenal.

They're looking at how they can make an impact on household budgets immediately, they're also making sure that they're maximising the employee benefits that they already have by creating campaigns and tools to increase awareness and adoption, so that employees don't just come onboard, at an induction have an awareness of the suite of services available to them, but increase that over time. And one of the things, and we will link it for your listeners in the show notes is things like an employee benefits calculator so that organisations can really consider how they can stretch their budget further. A pay rise after all is one of the most expensive ways you can compensate your people. By the time you have the additional on-cost for the employer, you have the tax impact for employees, the impact on the employee and their back pocket obviously has a significant hit there.

So, benefits are a really effective way for organisations to think about how they can stretch their employees' dollars further and ultimately amplify the disposable income, not only for the employee, but for their family. And after all, families are the biggest influences of employees’ employment decisions. So what we're seeing, is that people really need to think outside the box, we're seeing more and more employees that are doing that and thinking about how they can provide a cost-effective solution in a more impactful way. The other thing we're seeing is increased awareness on how to think about benefits more holistically and host it all in one place that provides people the opportunity to gain expert advice, to gain all of their benefits and options, whether that be an EAP, whether that be discounts program, employee share options and everything they offer, so that employees have the maximum awareness of the solutions that are right for them at different stages of their life as well.

Aidan Ormond:
Yeah, it's so interesting isn't it, Kylie. You touch on a lot of areas there, but historically I always remember workplace rewards being luxury goods in in the past. And it's so interesting now that people are looking at things like workplace rewards, that it's, it's more about just the daily household costs that we're really looking at. I think there's a stat I'm looking at here, 68% of Aussie employees say they want to be able to use workplace rewards on essentials, like groceries and petrol rather than those luxury goods and BMWs and what have you. Is that a fair way of looking at how it's kind of evolving?

Kylie Green:
Absolutely, it's been really interesting for us to see. And we support 1.1 million working Australians, so 1 in 14 working Aussies we have the privilege to support each and every day. And when I look at the spend pattern trends we see across the group as a collective, it's been really interesting to reflect the current climate. We're certainly seeing and increased spending in what I would call everyday essentials. So employees using their benefits for everything from groceries to petrol. We're also seeing some spend on what I would call discretionary items, but we're seeing that to focus more on things like travel or entertainment, but certainly less spend on fashion and electronics at this point in time. And what we're seeing that employees are making much more conscious choices around where they invest their dollars and becoming much more specific around the expectations of their employers, to help them not only realise a benefit, but actually to stretch their pay much further.

And and to your point, less on those luxury big ticket items and more on the day-to-day essentials is certainly what we're seeing. And we're seeing that right across the board. We support people that are working in manufacturing, production lines on sort of minimum wages right through to partnering with major professional and financial services and consultancy firms. We find that regardless, the focus and the emphasis for employees is still on maximising their disposable income because their lifestyle is ultimately adjusting to their earnings at each stage and certainly the pressure and financial pressure we're seeing is experienced across all categories of employers that we're supporting. And the requirement for employees to want to be more savvy with their dollars and have their employers help them to have access to a benefit that they wouldn't have access to as an individual is certainly something that we're seeing increased more and more.

Aidan Ormond:
Really looking forward to seeing how this all evolves over the next few years as we've gone through this cost of a living crisis. Tell me, Kylie, I'm very keen to know some some specifics. How much can employees and businesses save through benefits programs?

Kylie Green:
Yeah, the usage depends on an individual but Australians through the reward gateway platform saved more than 25 million dollars over the last year, so it's a significant amount of money that goes into the back pocket of employees and we're seeing on average an employee can save on the everyday essentials. So on a personal example to share with you Aidan, I spend about $300 a week on my groceries across Coles and Woolies for my family, but my twin girls do tend to eat a fair bit for for their age, they keep the family budget stretched there. But the discounts benefit there puts $600 in my family's back pocket.

So that's I guess one personal example to share with you. On average, an employee can save around $1200 a year, which is a nice way for them to increase their disposable income on just utilising their spending that they would normally do anyway. And we find that the spend on groceries, as I mentioned, the average Australian family spends just shy of $10,000 a year on groceries, spends over $3000 a year on petrol. So, it's a great way to stretch that disposable income. And then when it comes to that discretionary spending, maybe it's taking your kids to the movies, a day out, or maybe it's a family holiday that people have been saving up for, they can then stretch their um their income significantly further. So, on average, there's over 500 benefits that they can utilise. And what it gives people is that benefit of choice, that they can stretch that, amplify that income for them and their family.

Aidan Ormond:
You mentioned the word choice, Kylie, and I think it's a great word to use because I'm actually wondering if employers are listening to this podcast. I'm wondering how they can determine, businesses as well, how they can determine the right package or discount offering. I mean, is it easy or how difficult is it to build a package that attracts people across the generational divide?

Kylie Green:
Yeah I think it's one of the, certainly one of the challenges we're seeing more generations in the workforce now than what we've seen before. So your point around the generation divide, I think it definitely makes it for leaders in organisations to think about the breadth of their employee base. And if we consider that breadth, we're going to get Generation Alpha, in only 18 months time, joining the workforce, that that breadth is going to get even further. And I think there's a real opportunity for employers to consider their entire workforce and think about the breadth of choice.

To your point around how choice has evolved, I think there's an opportunity for employers to consider not only the breadth across generations and what could suit employees at different stages of their employee life cycle, what would suit employees at their different employee experiences. But also, to appreciate that employees' lives change quite frequently and give people the opportunity to have the flexibility to choose and to re-choose the benefits that best suit them at any point in time. And so maximum choice and maximum flexibility would be my recommendation to any employers.

The other thing when they're thinking about the right package or discount offering is equally as important as getting the right breadth of choice, is actually thinking about, when you're communicating it, communicating it to employees because their life stages change quite frequently. And so, the opportunity for employees to not only think about it as a one-time event when an employee is coming on board into an organisation through an induction but actually see it as a regular opportunity to package and promote up all the benefits that your organisation offers and positively reinforce that to employees is really important because the reality is that employees forget what's on offer to them. Which when you think about back to your point earlier, Aidan, around pay pressure, there is significant opportunities for employees to access benefits, but they may just not have awareness of them at the right point in time.

Aidan Ormond:
100% agree, Kylie, 100%. It's such a great point to make that I often hear about people not understanding that they're actually available.

Kylie Green:
And I think that's one of the biggest frustrations for leaders is there's a lot of work that goes into sourcing benefits, launching benefits. People often have an awareness of them when they started an induction process and it's all front of mind at that point in time. But how can they make sure that all employees are constantly reminded of the great benefits they have on offer as part of their employee value proposition, and reminded why they joined the organisation in the first place, and positively reinforce the benefits available to them. And then I think the third element there is not only the reminding them, Aidan, that you just touched on, but also how they can empower their people to access them and have a really quality experience that they can access at their fingertips, because the reality is we're also time poor nowadays.

So having a benefit that's available to employees at their fingertips that they can use on the go is really, really important, and equally important for managers to have access to tools that they can use when they're out and about on the go, because we are also time poor. So I think the range is important, the package and promotion is important, it's almost like if you're spoiling someone with an item from Tiffany and Co that that blue box is just as important as the item inside right, and I think it's the same for employers. How can they package and promote it up and then how can they deliver it to employees in a really seamless way, because we're seeing over time more and more employees are asking for experiences that match their expectation from what they're experiencing from consumers and so providing opportunities for them to access benefits from an app, access benefits on the go is a really important part of innovative employers being able to provide a really seamless value proposition and seamless benefits that showcase that they appreciate the requirement from employees, that the employees can make a choice around their organisation and thinking about all of the elements in that employee value proposition is important.

But also, that they recognise that their employees, that they've heard their employees, they understand that they're under financial pressure, they understand that as an organisation the pay is only one lever that they can pull and obviously in a current climate, in a softening economy, that's a lever that has restrictions. And so being innovative in other ways that as an organisation they can support their employees and help them to amplify their disposable income, and acknowledge and communicate the ways that their employees can actually access an opportunity to take advantage of the purchasing power as an employer that they can provide to their employees that they would not have access to otherwise.

Aidan Ormond:
And it does feel like employees expect more from employers these days.

Kylie Green:
Yeah, expectations are certainly very, very high. I think that if you think about the majority of the workforce that we have in Australia, we've had 12 years of economic prosperity. And so many employees have only worked through a significant time of strengthening economy and we've had significant talent shortages in Australia. And so there's been, very much a focus on and securing and providing value to employees in a really talent scarce market. We're seeing some changes, and the Australian Bureau of Statistics released their job mobility stats last week and we're certainly seeing some softening in job mobility, we're seeing some softening in some of the demands in the market.

But we're also seeing that innovative employers are recognising that. That doesn't mean that they can rest on their laurels, there is still a significant requirement to meet those expectations which are high, to provide a really impactful value proposition, to provide employees with a strong sense of purpose in their work, to provide opportunities for learning and development, to have a manager that cares. We're seeing organisations that, even if they are seeing softening in the requirements for talent in their organisations, they're recognising that that is a cyclical and and certainly a short-term impact and they're leaning into providing a really impactful workplace, a really impactful value proposition, a really impactful sense of purpose and sense of growth and development for their people.

And by doing so, they're able to ensure that they're not only attracting the best talent, they're retaining and engaging the talent, because we're certainly seeing in the downturn Aidan more stayers. But people staying does not always mean that you've got full contribution, full productivity. So driving that engagement, driving that discretionary effort is certainly something that leading employers are achieving. And their benefits and will also help support their brand out in the market. So as the economy picks up again, they'll certainly have an advantage in being able to attract ah great talent back into their business as they continue to grow again and be able to leverage the power that they have of the way they've supported their people through this time.

Aidan Ormond:
And to your point about innovative employers, I'm just looking at your report and it has 15 different options for businesses. So Kylie, if you had to pick, which benefits do you think have the biggest impact on the hip pocket and translate to employee engagement? If it's easy, you can pick a couple of different generations, but which ones do you think have the biggest impact?

Kylie Green:
Sometimes it's like picking my favourite child Aidan, so I definitely will never do that. But I think, when I think about the current climate, there's probably two benefits I'd pick. And I will say that there's a plethora of really important benefits that organisations provide that depending on the employee life stage provide a really meaningful impact. But if I was to pick two in the current climate, the first one would be financial wellbeing education. I think there's a great opportunity to support organisations, to think about their people and think about how to support them through managing their money and reducing their financial stress in the current climate. The second one would be the opportunity to provide an employee discounts program, because that can provide an immediate impact.

From week one employees can stretch their disposable income further, the family can have amplification of their disposable income and the everyday essential spend, whether that be groceries, petrol or whether they're buying their kids you know new soccer boots for sport or all of those items that families are spending on. They'll be able to stretch their dollar further and that's an immediate benefit that recognises the financial pressure people are under and helps the employee to receive a benefit, but also a benefit that is linked back to their employment and obviously positively reinforces the value that the organisations bring each and every day. So they if I had to pick two Aidan, they would be my top two.

Aidan Ormond:
Well, look, I think we could chat about this all day because it's such an interesting area. And I think there's so much growth in this area that this cost a living crisis has put a spotlight on. But Kylie, thanks so much for sharing your insights today, I think this is an important topic and Kylie it was great talking to you.

Kylie Green:
Lovely to talk to you too. Thank you for having me, Aidan.

Aidan Ormond:
And thank you for listening to INTHEBLACK. Don't forget to check the show notes for resources on the CPA Australia and INTHEBLACK websites and the full report on how businesses can help their employees while not breaking the bottom line.

Garreth Hanley:
If you've enjoyed this episode, help others discover INTHEBLACK by leaving us a review and sharing this episode with colleagues, clients, or anyone else interested in leadership, strategy and business. To find out more about our other podcasts, check out the show notes for this episode. And we hope you can join us again next time for another episode of INTHEBLACK.