By Michael Doolin, the CEO of Clover HR

After two successive quarters of falling output towards the end of 2023, the UK officially entered into economic recession.

For the nation’s workers, this has meant higher living costs, greater uncertainty and stress, all compounded by reduced access to credit, higher interest rates and difficulty paying rent, mortgages and bills. UK hunger charity, The Trussel Trust, furthermore distributed almost 3 million emergency food parcels to families in need last year, with little expectation of improvement over forthcoming months.

With one in eight workers already living in in-work poverty, according to the Jospeh Rowntree Foundation, it’s clear that more needs to be done to support those fighting the recession from a position of employment. But does the answer lie in salary alone?

Understanding employee motivations

In periods of recession, employees will naturally feel motivated by higher salaries and greater financial rewards. Not only are they battling reduced income and an increased cost of living, but they’re also contending with heightened job security anxieties, increasing their drive to seek economic protection.

Employees who feel stable and secure in their current jobs are much less likely to seek alternative employment, with those lacking reassurance conversely resorting to practices like frequent job hopping to access higher salaries, at-work bonuses and profit-sharing arrangements, to name just a few examples.

The impact of financial stress on performance

Beyond retention, performance is another significant reason to prioritise financial recognition. According to the CIPD (Chartered Institute of Personnel and Development), almost a third (29%) of employees report lower productivity in the workplace as a result of their cost-of-living-related woes.

Flexible compensation

Of course, in uncertain times, it can be difficult for employers to offer that much-needed salary increase to all, which is why flexible compensation mechanisms prove so important. Variable pay and performance-based bonuses allow employers to adjust incentives based on both employee output and changing economic conditions, ensuring that company goals can be aligned with increased financial support.

Beyond monetary rewards

Nevertheless, it’s not just financial incentives that keep people motivated. When employees feel valued and rewarded in any way, they are much more likely to feel secure, therefore reducing the likelihood of valuable talent being lost to competitor roles. Non-financial incentives prove particularly appealing to those who prioritise work-life balance, with the recession also resulting in an increase in people who don’t want to give up their whole lives for mere survival.

Tailoring incentives to current needs and conditions

The most effective way of keeping staff happy is to ask team members what they need and want, tailoring incentives to their unique circumstances to maximise impact. Short-term incentives, such as one-time bonuses, spot awards and temporary perks could furthermore be introduced to address the most pressing needs and challenges.

Strengthening communication channels

Employers have a duty to relieve stress and other recession-related symptoms, too, rather than simply providing monetary support. By strengthening company communication, remaining transparent and keeping all team members informed, leaders can ease anxieties surrounding potential redundancies and the company’s future, with this reassurance proving invaluable when it comes to retaining talent.

Offering financial literacy support

Of course, if employers want to make more of an impact beyond the means that they can personally offer, access to financial counselling and debt management assistance to those who consent can be of help. According to the latest MaPS Adult Financial Wellbeing Survey, 45% of all UK adults lack confidence when it comes to managing their money, with over 9 million of us in serious debt. A further five million approaching retirement age lack an appropriate pension or savings, according to the Centre for Aging Better (2021), highlighting an urgent need for improved money-management skills.

Flexible work arrangements

Supporting work-life balance also proves invaluable during times of economic uncertainty, allowing employees who don’t need to come in to cut down on non-essential travel costs. Likewise, greater agility with working hours where possible can help families to make significant childcare savings.

Strategies for long-term wellbeing

Beyond this, employers must seek to foster a company-wide culture of support, where colleagues listen to one another and help each other out.

Developing desirable career advancement pathways can also help to combat recessionary angst, as people who perhaps feel they have lost their motivation will regain a sense of purpose that will keep them happy and engaged in their role.

Finally, by emphasising employee wellness programmes for holistic support, employers can tackle money-related stress, maintaining desired levels of productivity whilst making it clear that employees are still safe to take time off when needed. During times of economic hardship, the fear of losing a job can be enough to force those who are sick to push through and continue working – a perceived obligation that only results in heightened illness and stress.

Ultimately, businesses need to develop a comprehensive employee financial wellbeing policy (EFW) to guarantee a comprehensive approach to recessionary support. The more ways in which employers can support their team members throughout these ongoing struggles, the better, be it emotionally, professionally or financially, through salaries, bonuses and incentives, in-work recognition or wellbeing rewards.