Home / Blogs / Navigating the Cost of Living Crisis and the Christmas Period

Navigating the Cost of Living Crisis and the Christmas Period

Incentives Cost of Living Xmas Web Size

The country is currently in the depths of a cost-of-living crisis that has left many individuals and families struggling to make ends meet. As prices continue to soar and wages struggle to keep pace, the burden of maintaining a decent standard of living is becoming increasingly strenuous. This situation is further exacerbated as we approach the Christmas period, when additional expenses, such as gifts and holiday celebrations, put extra pressure on households. In such trying times, incentivising and rewarding employees as an employer takes on a profound significance that shouldn’t be overlooked. Indeed, in moments such as these, relatively small gestures can have a significant impact. 

What is the Cost-of-Living Crisis?

Rising Prices

The cost-of-living crisis can be attributed to various factors, with one of the most significant being the continuous rise in prices. Essential goods and services, including housing, food, and energy, have seen substantial increases in cost, making it increasingly difficult for individuals and families to cover their most basic needs.

  1. Housing Costs: The housing market has witnessed skyrocketing prices, making it challenging for many to afford decent accommodation. This crisis is particularly pronounced in London, where housing costs are exponentially higher than that of the national average. For instance, the annual private rental price rose 5.7% in the 12 months to September 2023 – an increase that’s continued unabated for the past few years[1].
  2. Food Inflation: The cost of food has surged, driven by factors such as supply chain disruptions and increased global demand. This directly impacts the everyday expenses of UK citizens, who find themselves spending a greater portion of their income on groceries. According to the Office for National Statistics (ONS), around two thirds of adults are spending less on non-essentials due to the crisis.
  3. Energy Costs: Energy prices have also surged, adding to the financial burden on households: 50% are using less fuel in their homes because of the increase. The rise in energy bills has been driven by the global energy crisis, increased demand and higher fuel costs across the board, and shows no signs of slowing down.

Stagnant Wages

While the cost of living has been rising, wage growth has failed to keep up the pace. The Resolution Foundation found that workers in the UK are £11,000 worse off a year after 15 years of ‘completely unprecedented’ wage stagnation according to The Guardian[2]. Many employees find themselves earning stagnant incomes, which often fail to cover the escalating expenses of daily life.

  1. Real Wage Growth: The real wage growth in the UK has been sluggish in recent years, with a fall of 3% after inflation recorded last year[3]. This means that, in terms of what they are able to reasonably afford, people’s purchasing power has decreased, making it harder and harder to avoid living paycheck to paycheck.
  2. Income Inequality: The income gap between the highest and lowest earners in the country has widened considerably, especially over the course of the pandemic, further exacerbating the current crisis. Last year’s figures indicate an increase of up to 35.7% for 2021-2022, up 1.3% on the year prior[4]. Those at the lower end of the income spectrum are disproportionately affected by rising prices.

The Christmas Period: An Added Challenge

The current crisis is further intensified during the Christmas period. This festive season brings additional financial burdens, including the purchase of gifts, holiday travel, and hosting celebrations. In this context, incentivising and rewarding employees for their work becomes an ever more vital aspect of staff welfare.

Gift-Giving and Expenses

Giving gifts is great, and it’s one of the things that makes Christmas special. However, the tradition of gift-giving during the festivities places a significant financial burden on individuals and families. Employees, like everyone else, are likely to feel the strain of these added expenses.

Financial Stress

Employees may experience heightened financial stress as they grapple with the pressure to buy gifts for loved ones. In some cases, this can lead to financial hardship or even debt.

Worry and Work

As a result of this stress over money, there’s a possible effect on an employee’s ability to maintain focus and keep productive at work. By providing incentives and rewards, employers can help alleviate this stress and maintain a high level of employee performance.

The current situation shows that there is now a desperate need – perhaps more than ever – for employers to show their support towards their staff. As demand for financial aid increases, many businesses are recognising the importance of supporting their employees during these difficult times.

The Significance of Incentivising and Rewarding Employees

An employee incentive scheme can come in various forms, such as bonuses, recognition programmes or company-wide initiatives. Regardless of its form, offering incentives has numerous benefits for both the employer and employees.

The role it plays in fostering employee morale, retention, recruitment, productivity and performance cannot be overstated. Appreciation and recognition are critical in ensuring employees feel valued, which in turn enhances job satisfaction, improves morale, and reduces the likelihood of employees leaving the organisation. We refer to such employees as ‘engaged employees’.

Engagement of staff is crucial. Nearly half of employees (44%) left their previous organisation due to a lack of recognition[5], while engaged employees are 87% less likely to leave their role and are 21% more profitable to the business due to increased productivity and a positive work environment.

According to research published by Gallup, engaged workers outperform others by 10% in customer satisfaction, 21% in productivity and 22% in profitability. Meanwhile, they also see 37% lower absenteeism, a 48% reduction in safety incidents and as much as a 65% staff turnover rate in low-turnover businesses[6].

Amid economic challenges and rising living costs, rewards and incentives serve as robust strategies for not only retaining existing employees but also attracting new talent: PageGroup suggest 78% of Britons would be more likely to apply for a job if benefits and incentives are mentioned in the advert[7].

Financial Support: Beyond the Regular Paycheck

With present circumstances and the benefits of supporting your employees in mind, let’s take a look at how you can help your staff beyond just the regular paycheck during this trying time.

Christmas Bonuses

The importance of Christmas bonuses (especially this year) cannot be emphasised enough. These bonuses act as a financial lifeboat, helping employees cope with the rising costs of necessary goods and services during the festive season. They also reflect the company’s understanding and acknowledgement of the ongoing economic difficulties, boosting team morale and loyalty. Christmas bonuses are more than just corporate benevolence – they are a crucial measure that can help to ease the financial strain caused by the cost-of-living crisis.

Naturally, however, the amount of the bonus should also depend on what the business can reasonably afford and the individual merit that the employee has shown throughout the course of the year.

Interest-Free Loans

Given the current crisis and the looming spectre of Christmas, interest-free loans offered by employers emerge as a potential solution for struggling employees. Such loans, often part of an employee benefit scheme, can provide immediate financial relief without the burdensome interest rates associated with traditional bank loans.

In times where inflation rates are soaring and household budgets are stretched thin, these loans can play a crucial role in helping employees manage essential expenses, from utility bills to grocery shopping. They also present a win-win situation; acting as an effective tool for retaining staff and boosting morale within the workplace, while employees gain the advantage of a low-cost borrowing alternative in times of need.

Vouchers and Gift Cards

Many businesses offer tax-paid gift cards for employees to use at the shop of their choice. They’re an excellent option for staff as they encourage people to use them for Christmas gifts themselves rather than to pay bills or other essentials, and, by utilising this method, you not only show your appreciation for your employees, but remove much of the administrative burden otherwise associated with rewards and bonuses.

At HR:4UK, we have many years of experience in providing businesses up and down the country with this brilliant type of reward. To find out more, click here.

Early Pay Options

Another way in which employers can support their employees through the Christmas period is offering a form of advanced wage structure, so that their usual pay date is pulled forward. This can be especially helpful for staff with large families to cater for, as receiving their pay later may cause issues for them.

However, it should also be noted that it makes January a much ‘longer month’. There’s a larger gap between the pay dates, and many might struggle as a result. Be mindful of the pros and cons before opting for early pay options.

Non-Financial Support: Offering a Helping Hand

Aside from the above forms of financial support, there are other factors that money alone simply cannot address. The current cost-of-living crisis coupled with the pressures of Christmas places more than just monetary worries upon employees; it can cause stress, worry, anxiety, depression and more. Due to this, it’s wise to look at what employers can do for their employee’s general sense of wellbeing.

Mental Health & Wellbeing Initiatives

One method that companies may look to in order to achieve this is to implement mental health initiatives such as hosting workshops that teach mindfulness and stress management techniques. Additionally, providing access to confidential counselling services can offer employees a safe space to discuss personal or professional issues.

Budgeting & Financial Management Workshops

Budgeting and financial workshops provide crucial skills in financial literacy, assisting individuals to navigate this challenging landscape. They offer insights into smart budgeting techniques, cost-saving strategies, and sound financial decision-making, which are particularly valuable during this financially stressful period. Given the additional expenditure associated with the holiday season, these resources can be instrumental in helping people to balance the costs of festivities with the reality of increased bills and expenses, thereby mitigating at least some of the impact of the cost of living crisis.

Employee Discounts and Partnership Schemes

Another helpful method are employee discounts and partnership schemes, which can be a timely boon for workers, particularly given the current predicament. These benefits can significantly offset the financial pressures employees may be facing: From saving on everyday essentials to bigger ticket items, these discounts can make a real difference in the purchasing power of an individual.

These savings can help manage budgetary constraints, ensuring everyone can partake in the spirit of gifting and celebration. Partnership schemes can also open up access to a wider array of products and services, making it easier for employees to find what they need at a discounted rate. In essence, these benefits not only provide financial relief but also boost morale and employee satisfaction, which can foster a more positive work environment in turn.

With each of the above methods, there’s one which should be a mainstay of your company culture regardless: that of open communication. If you encourage your staff to voice their concerns, whether financial, social or mental, then they will stand a much better chance of successfully navigating their way through this tricky period.

Recognising Individual Needs: Personalised Support

Short-term considerations

Offering tailored financial assistance in the ways highlighted above can be an effective short-term solution. However, financial support is only part of the equation. Companies should also prioritise emotional support: Open dialogues, regular check-ins, and resources for mental health can ease the stress and anxiety that may come with financial uncertainty.

Long-term considerations

Looking towards long-term considerations, it is essential to review compensation packages in line with the rising cost of living to ensure that employees’ salaries retain their real value – their real wage. Moreover, planning for continuous learning and growth is vital. Investing in employees’ professional development not only equips them with the skills to adapt in uncertain times but also communicates a commitment to their future within the company.


“Christmas is a togethery sort of holiday. That’s my favourite kind.”

  • Winnie the Pooh

It’s vital that we remember to look after our teams, especially with the current cost-of-living crunch in the UK, and with Christmas right around the corner. A lot of people are feeling the pinch, and it’s up to you, as employers, to lend a helping hand wherever you can. By adding a little extra cheer in the form of incentives and rewards, we’re not just helping your team get through tough times, but you’re also adding a spark to morale, making your company a great place to be and ensuring that your workplace is a buzzing one, full of optimism, cheer and productivity.

Moreover, the festive period is a great time for us to spread some joy and take the edge off any financial worries. Keeping your workforce motivated and appreciated isn’t just about combatting tough economic times, it’s about building a community where all feel valued and engaged, all year round. By nurturing this kind of environment, we’re all better equipped to weather any economic storm together.

For help and advice on how to look after your staff during these tough times, why not contact or dedicated team of friendly advisors on 01455 444 222 or email [email protected] to spread a little bit of Christmas cheer.

Alternatively, you can refer your employees to the following numbers for help with debt and mental health support:

  • National Debtline: 0808 808 4000
  • Step Change Debt Charity: 0800 138 1111
  • Citizens Advice: 0808 223 1133

For Mental Health:

  • Samaritans: 116 123
  • Mind: 0300 123 3393
  • Re-Think Mental Illness: 0808 801 0525


[1] Office for National Statistics (ONS). (20th October 2023). Cost of Living Latest Insights.https://www.ons.gov.uk/economy/inflationandpriceindices/articles/costofliving/latestinsights

[2] The Guardian. (20th March 2023). UK Workers £11,000 Worse Off After Years of Wage Stagnation – thinktank. https://www.theguardian.com/business/2023/mar/20/uuk-workers-wage-stagnation-resolution-foundation-thinktank

[3] The Independent. (16th August 2022). Cost of Living Crisis: Wages Plunge at Record Pace as Bills Soar. https://www.independent.co.uk/news/business/uk-wages-cost-living-latest-bills-b2145826.html

[4] Office for National Statistics (ONS). (25th January 2023). Household Income Inequality, UK: Financial Year Ending 2022.https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householdincomeinequalityfinancial/financialyearending2022

[5] People Management. (13th March 2023). Why Recognition and Reward in 2023?https://www.peoplemanagement.co.uk/article/1816014/why-recognition-reward-2023

[6] Gallup. (20th June 2013). How Employee Engagement Drives Growth.https://news.gallup.com/businessjournal/163130/employee-engagement-drives-growth.aspx

[7] Page Personnel. (2023). The Employee Benefits Battleground: Use Your Perks to Attract the Best Talent. https://www.pagepersonnel.co.uk/advice/management-advice/attracting-candidates/employee-benefits-battleground

Angela Clay

A qualified employment law solicitor and our managing director, Angela has unparalleled legal expertise and decades of experience and knowledge to draw from. She’s a passionate speaker and writer that loves to keep employers updated with upcoming changes to legislation, and is a regular guest speaker on BBC Leicester Radio.