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Sunday, Jul 06, 2025

How firms are wrestling with cost-of-living spikes

How firms are wrestling with cost-of-living spikes

As living costs rise amid inflation, some companies are helping squeezed workers out with wage hikes, bonuses or even free food.

Last month UK-based carmaker Rolls Royce announced it would give more than 14,000 lower-ranked workers a one-off payment of £2,000 ($2,430) to “help them through the current exceptional economic climate”. Other companies have taken similar steps: major UK banks, such as Barclays and Lloyds, are giving lower-paid staff out-of-season pay rises or cash bonuses, while there are also examples of small businesses giving workers bonuses to help them cope with the current surge in living costs.

As of this writing, inflation sits at 9.4% in the UK, the highest level seen since 1982. In the US it’s 9.1%. Whether it's a coffee, food, housing or bills, the staples of our daily lives have all become more expensive in the past six months. Wages have also been rising, but not as fast – meaning workers’ take-home pay is buying them less, leaving many people struggling.

In these circumstances, some employers are stepping up to help out workers, with cash injections or other subsidies that can help them shoulder these rising costs. But the move isn’t across the board, and experts say companies face a tricky balancing act. Firms want to save money in case a recession hits, and some organisations may not be in a position to act nimbly. But companies also need to retain workers in a tight labour market that favours jobseekers – because if firms don't do more to help workers, employees might go somewhere that will.

Making moves to help


At the moment, the basics of life are getting more expensive: groceries, clothing, petrol, childcare and utilities, as well as housing; rents are skyrocketing in cities, and many people can't afford homes as home prices have also gone up. Even going to work itself feels more expensive, as commuting costs, food and other incidentals all mount up.

Many workers are struggling to handle these increased costs – which are linked to rising energy, fuel and food costs because of the war in Ukraine as well as shortages of goods and labour, plus supply-chain hurdles – and asking what their companies can do to help them out.

Fuel, food, housing and more have all skyrocketed in the past several months, and many workers want employers to help more with the hikes


Decades ago, says Perry Sadorsky, professor of sustainability and economics at York University, Canada, workers in many Western countries belonged to unions that would have bargained for cost-of-living adjustments. Those schemes "would kick in quickly to changes in inflation, helping to restore real wages". But these days, union membership in the UK and the US has plummeted, meaning that in the absence of collective pressure, it’s up to companies to decide for themselves if they should be helping.

Many firms that have chosen to help are large private-sector organisations. Some are throwing money at the problem, like Microsoft, which reportedly doubled its budget worldwide for merit-based raises, and ExxonMobile, which gave US workers a one-time bonus of 3% of their salaries to weather price hikes. In the UK, bank Virgin Money offered staff a one-time bonus of £1,000, on top of pay rises in January of 5%.

Other companies are taking a different tack; they’re not offering overt financial incentives, but they are trying to take some expenditure off employees’ shoulders. Some smaller companies in the US have started giving workers gift cards or weekly stipends of $50 to help pay for fuel, or offering free food for staff who come into the office. Others are allowing staff to work from home, which means savings on commuting and other work-related costs (and there’s certainly evidence workers want this; a recent survey of early 3,000 UK workers showed 45% were pushing for more remote working to save commuting costs).

"More and more smart employers are saying, 'there's a two-fer here: you prefer remote work, so we're going to give you hybrid – but you're also going to save money'," says Johnny C Taylor Jr, CEO at the US-based Society for Human Resource Management (Shrm).

Some companies can only do so much


Workers want help, and many companies want to help. Yet it's not something every company can do. Right now, notes Taylor , employers are facing challenging times; they’re grappling with the need to attract and retain talent, while simultaneously not overspending in a way that means they might need dire cost-savings moves later on.

Companies who fail to adjust for inflation are at risk of losing their top performers - Jean-Nicolas Reyt


"The problem is companies can't make short-term decisions [to give workers extra compensation] that will impact the long-term viability of the company," says Taylor. He points out that some companies, especially big firms, have already found themselves cutting costs, rolling back spending, freezing hiring and even letting people go after zealous hiring and spending sprees over the last year. "Companies are trying to strike this balance," he says.

An additional complication is that not all organisations can be equally agile around cost-of-living adjustments. For example, public-sector jobs have "a disadvantage in terms of flexibility of giving a pay raise, and a bonus – not to mention stock market options", all of which give workers more security, inflation or no, says Runjuan Liu, professor of business economics at University of Alberta, Canada. More government oversight makes it harder for such institutions to offer the bonuses and high compensation that private sector companies can, she explains.

It can depend on company size, too, says Jean-Nicolas Reyt, associate professor of organisational behaviour at McGill University, Canada. Smaller or medium-sized companies may be faster to offer help, but might be in a weaker financial situation to do so in the long run. A recent Goldman Sachs survey of 10,000 small businesses in the US revealed 67% of them had increased wages to retain workers, even as 91% reported broader economic trends were negatively affecting their businesses.

‘A hard pill to swallow’


Because of all these factors, companies' best efforts to help workers through the cost-of-living spike will differ – and in some cases, they won’t be enough for workers.

Some companies are offering new perks like free food and transportation vouchers, though most workers simply want compensation to rise with inflation


"Companies that do not match inflation are essentially asking their staff to take a pay cut. That's not fair, and that's a hard pill to swallow for employees," says Reyt. "When employees are unhappy with their treatment, they typically look for alternative employment."

Liu urges workers in organisations that aren’t helping workers out substantially – including the public sector – to take a pause and look at the bigger picture. "What I observe is that the public sector has better benefits" like solid pension plans, health insurance and more; since public sector pay is determined by government regulation and taxpayer funding, public sector workers could find a degree of stability in the current economy, argues Liu. "If I'm looking for a job, I'm looking beyond the pay cheque: so, location, flexibility, benefits, compensation, retirement package, health benefits."

Taylor says it's important employers be transparent in communication with workers about what they are and are not able to do. They can say, "'I can do this much; I can do other things which are intended to save you money – not necessarily put money directly into your compensation package," he explains.

It's a difficult time for everyone: workers want more money, and companies want to keep them aboard, all while navigating a potentially precarious economic environment. Yet companies who don’t find a way to address workers’ requests for help may face deeper impacts down the line.

"Companies who fail to adjust for inflation are at risk of losing their top performers," says Reyt.

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