Recent inflation figures charting an increase in the cost of living have provided an unwelcome reminder of the sustained pressure being placed on the personal finances of the UK population.

The costs of goods, as measured by the Consumer Prices Index (CPI), rose by 3.5% in April. This was up from 2.6% the previous month and the highest level recorded for more than a year.

While far below the 11.1% registered at the peak of the cost-of-living crisis in October 2022, the impact of such a rise will still be felt in the pockets of consumers. And with the Bank of England acknowledging that inflation is “on a bumpy path”, experts predict there will be further increases throughout 2025 before the rate returns closer to the 2% target set by the government.

Rising living costs

Having endured several years of difficult economic conditions, employees have little choice but to accept and absorb these hits to the cost of living, which manifest themselves through pressure on food and energy prices.

This situation is compounded by the fact that interest rates remain well above the historic lows of recent years, meaning the cost of borrowing also remains elevated. Admittedly, the easing of the Official Bank Rate, which since August 2024 has gradually fallen from a recent high of 5.25% to the current level of 4.25%, signals an easing of this pressure, but many are still adjusting to larger mortgage repayments, and are hopeful that predictions of further interest rate cuts come to fruition.

Taken together, these factors understandably provide cause for financial concern. A survey by YouGov found that in March 2025, the majority of people (56%) have been affected by cost-of-living pressures in recent times. An even greater proportion (61%) are not optimistic about the outlook, saying they expect to have to make cuts in the future.

Cause for concern

Among the workforce, money worries are cited as a major issue. Indeed, one survey suggests they are now the top concern for employees, with more than a quarter (27%) saying they worry about money every day.

These findings are echoed by the Financial Conduct Authority’s most recent Financial Lives survey. This uncovered that 13.1 million UK adults had low financial resilience, which is defined by having low levels of personal savings and feeling heavily burdened by bills and/or credit commitments. It also includes those in financial difficulty, who have missed payments in three or more of the past six months.

Even for those who are not experiencing financial difficulties to the same extent, there can be damaging implications. Money worries are a major source of stress, potentially leading to lost sleep and putting individuals at risk of suffering from poor physical and mental health.

Addressing the issues

In work environments, the effects can be seen in poor concentration and reduced productivity. At worst, it can lead to absence through ill health. And young workers and those earning less than £40,000 are reported to be particularly vulnerable to these outcomes.

Pay is undoubtedly one of the most important levers that companies have available when looking to address some of these issues. As such, it is incumbent on employers to ensure their workforce are supported by a fair remuneration policy that, as far as possible, supports workers who are wrestling with affordability issues.

But from a commercial perspective, there are obviously limits as to how much of this type of support is available. Recent increases to National Insurance liabilities are thought by the Office for Budget Responsibility to add around 2% to employers’ payroll costs, necessitating close control over rising wage bills.

Rewards and support

Furthermore, there is evidence to suggest that pay is not the ‘be all and end all’ when it comes to wellbeing through work. It is, of course, an important motivator, but the relationship between financial reward and engagement is not necessarily linear, and there is a growing body of evidence to show that over-emphasis on money has the potential to undermine our sense of autonomy, which is key to worker satisfaction.

In this context, employers are faced with a more complex challenge when it comes to helping workers with their money worries. Experts advise that the promotion of financial wellbeing should be considered as an independent yet integrated strand of an organisation’s wider approach to workforce wellness. This involves putting in place a series of initiatives and measures that can help build knowledge and resilience while also providing direct help and support.

Education is a crucial part of this equation. This can manifest itself as signposting of authoritative financial information and guidance, or the co-ordination of workshops and seminars to help deepen understanding of financial matters and empower employees to establish greater control over their finances.

Feeling the benefit of benefits

Employee benefits are another important support mechanism. Salary sacrifice schemes, payroll saving, and discount offers are examples of measures that can all play a valuable role, whether staff are looking to boost pension contributions over the longer term or simply looking to ease their month-to-month spending pressures. Taken together, these approaches can form a powerful toolkit to support staff in tackling money troubles and keeping on top of the cost of living at a time when its impact is still being felt.

And for companies that have already established a financial wellbeing strategy, it is important to keep communicating the value of the help on offer, since there is often a mismatch between the value that employers think they are offering and the level of support that employees feel they are receiving.

Providing the right mix of financial, emotional and practical support to help address money worries is not necessarily easy, but companies that achieve this balance can enjoy the rewards of happier, more productive teams, and increased staff loyalty, making it an investment worth its weight in gold.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Corporate or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.