Inflation’s toll on salaries is affecting businesses as well as employees

PAY in the UK has fallen once it has been adjusted for inflation even though most salaries have increased.

Global employee pay company, CloudPay, warned that more sustainable benefits packages needed to be adopted to offset this problem.
“It’s clear that the rising cost of living is continuing to put significant pressure on businesses as staff and potential recruits seek higher pay packages in what remains a tough economic climate,” CloudPay’s John Pearce said.

Inflation had created a scenario where salary rises were having little or no impact on household budgets and firms seemingly faced an unsustainable level of demand for more increases, he added.
“The challenge, of course, is that employers are already struggling with skills shortages, meaning that many are having to use pay inflation as an attraction and retention tool,” Pearce said said.

“But this can only be sustained for so long and businesses will need to find an alternative soon,” he warned.

Benefits packages, which were more cost-effective long-term for businesses, would be increasingly relied on, CloudPay foresaw.

“That includes flexibility around pay solutions allowing individuals to control when and how often they access their pay to help mitigate against some of the budget challenges that the UK population is facing,” Pearce said.