The 2020s have been extremely challenging for HR professionals. In the half-decade to date, HR experts have helped their employers navigate the end of the Brexit debate, a pandemic, the candidate shortage, a cost of living (and associated cost of borrowing) crisis, and the return of large-scale industrial action in some sectors.
Yet some of these issues have not fully gone away, and in particular the cost of living challenges for millions of UK workers could well move back into the limelight in 2025.
Energy prices are up, as are food prices. These are the building blocks of another cost of living crisis, albeit a less extreme version of that witnessed in 2022.
Read more: Cost of living learning hub
Yet many would counter the above with the (welcome) inflation news published last week. The unexpected drop in that measure has cooled immediate concerns around borrowing rates. And with pay awards in 2024 often outstripping inflation, some in HR could be forgiven for parking this issue.
New concerns
Yet the reality is rather more uncertain.
Increased employer national insurance and minimum wage costs come into force in April. The Office for Budget Responsibility suggests that 60% of those costs will be passed on to workers and consumers (often the same people) via lower wages and higher prices in 2025.
Read more: How to tackle the cost of working crisis
And then there is the potential of US trade tariffs. While the initial inflationary pain of President Trump’s proposed tariff barriers will be first felt by the American people, a global tariff war has the potential to impose price inflation in every major economy, including the UK. Those same concerns extend to borrowing costs, potentially leaving mortgage rates at a higher level than previously predicted.
Old wounds
These new financial pressures have the potential to open old wounds in employee financial wellbeing. Those recent above-inflation pay awards have been very welcome but will not have fully corrected the decade or more when real-terms wage growth was all but non-existent for millions of workers. Indeed, that long period of income stagnation was one of the reasons why the double figure price-spike in 2022 and 2023 was just so difficult for working families to absorb.
The reality is that many working families remain financially fragile. This can be simply evidenced by the exponential growth of UK food banks from just 10 in 2009 to an estimated 2,800 by the end of 2023. The Trussell Trust foodbank charity estimates that around one in five food parcels were provided to working families in 2022.
Employer challenges
It follows that the cost of living may once again become a problem for working households in 2025. And this also represents yet another challenge for employers.
Read more: How to get payroll right in the cost of living crisis
Employees distracted by money issues may look elsewhere for more lucrative employment, with all the associated business continuity, recruitment, and replacement challenges this potentially poses for employers. Financially stressed workers that don’t seek employment elsewhere might become less engaged and productive. These are outcomes that employers will wish to avoid given the nation's continued economic uncertainty.
It follows that HR professionals should continue to offer and promote financial wellbeing support, and look to add to such offerings, this year and beyond. The cost of living crisis may – or may not – return, but the reality is that for millions of workers it never really went away.
By Steve Herbert, brand ambassador at Occupational Health Assessment