With interest rates now at 5%, there are fears that mortgage holders are facing a difficult outlook.
The Institute for Fiscal Studies has predicted 1 million households will lose at least 20% of their disposable income as interest rates increase on mortgages.
Driven by transport costs, food costs, and some luxury items, the rate of inflation is still at 8.7%.
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Kate Palmer, HR advice and consultancy director at Peninsula, said stubbornly high inflation coupled with higher interest rates means HR needs to focus on their workforce’s wellbeing.
Speaking to HR magazine, she said: “Employers should ensure there are effective longer-term measures in place to support employees’ financial wellbeing.
“In many cases, pay rises won’t be possible however, this doesn’t mean employers should do nothing and they should remember that there are plenty of other ways they can help.”
Palmer suggested doubling down on hybrid or remote work to lower commuting costs, financial education offerings, transport loans and providing training so employees can look to get more senior, higher-paid work in the future.
Idris Arshad, HR business partner at St Christopher’s Hospice is confident that HR will be well-placed to deliver support due to the work it has done throughout the cost of living crisis.
He told HR magazine: “However, stigma can be attached to money conversations so even if you have great support make sure your managers are equipped to have conversations with those who will struggle.
“Get the message out there that they can speak to you, train managers, know who will be impacted, and push out communication around your benefits and support.”
While headlines on the interest rate hikes make for difficult reading Callum McCaig, communications and policy at Wagestream, said HR is well placed to act and provide support in a tailored manner.
Speaking to HR magazine, he said: “Don't be distracted by headlines on issues like mortgages: audit your workforce and customise your financial wellbeing support in line with the financial issues impacting them the most.
“Get realistic about resources and budgets, and prioritise tailored initiatives with demonstrable business impact.
“And remember the three key actions as an employer [around your financial support]: customise, prioritise, advertise.”
There has also been pushback on reasons given by Andrew Bailey, Bank of England governor, for the rate rise, as he cited a wage-price spiral.
Paul Nowak, general secretary of the Trades Union Congress (TUC), said the Bank of England and the government should focus not on wages but on a plan to improve the economic outlook.
He said: “Instead of scapegoating workers who are desperate for their pay to keep up with prices, ministers should focus on a credible plan for sustainable economic growth and rising living standards.”
