• Managing people

Should Employers Help with Inflation?

IMD’s Anand Narasimhan offers advice to employers on helping employees through the cost-of-living crisis


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As businesses across the world struggle to cope with energy price hikes, soaring inflation and COVID-disrupted supply chains—amid general economic gloom and geopolitical turmoil—should they be acting to help their employees with the severe cost-of-living crisis?

This is not a crisis that is affecting only those on low incomes—middle-income families with mortgages to pay are struggling to get by too, and the crisis is escalating. Some will say employers have a moral duty to help their people. The more hard-headed will worry lest financial stresses take a toll on employee performance.

On the other hand, companies which are being forced to absorb massive additional external costs, and are already seeing a sharp decline in profits, will be wary. Offering financial help to employees could derail their own survival plans, unsettle shareholders, and might even endanger their own existence.

In a recent article on the IMD website Anand Narasimhan, Professor of Global Leadership and Dean of Faculty and Research at IMD, offers valuable perspective on the dilemma facing employers, asking three questions about what employers should be doing for their employees. Here is an abridged version of his answers:

1. Are senior leaders ready to respond? 

At the height of the pandemic, many business leaders were praised for their compassion. But the pandemic was an external shock that affected every employee, irrespective of their wealth. The cost-of-living crisis is something very different.

Insulated from price rises by high incomes and accumulated wealth, many senior executives may be simply unaware the financial challenges their staff now face. Only the more empathetic and engaged leaders will understand the scale of the problem—and the impact it could have on their workforce.

2. What exactly can leaders do to help?

When employers do recognize financial hardship in the workplace, there are several ways in which they could help—and the most obvious responses will not necessarily be the most appropriate.


Salary increase is clearly an option. But across-the-board salary increases do not efficiently channel support to those who need it most, and higher-paid staff may demand increases too in order to maintain salary differentials. Furthermore, wage increases may simply contribute to the inflationary spiral.

Benefits, subsidies and discounts 

One alternative might be to focus resources on benefits that are likely to be of most value to hard-pressed workers. That might include more support with the cost of childcare or subsidized meals in the workplace. Similarly, transport costs are a disproportionate burden on those on low incomes, so subsidies here could prove valuable.

Employers could put their purchasing power to work on behalf of their staff by sourcing products at lower prices than individual workers would normally pay. One straightforward way to do this is to offer staff access to a rewards scheme. Arrangements such as Ben and RewardGateway, for instance, offer employees significant discounts at retailers, supermarkets and pharmacies. 


Employee assistance and wellbeing programs can provide expert help in several areas. Employers can support improved financial literacy, if only by signposting employees to independent sources of advice on money and debt and by ensuring that staff are claiming all the benefits they are entitled to at work. Increased support with mental health may also be crucial as financial stress increases.

Talk to employees 

To know which support measures staff will value most—ask them. There are formal and informal ways to do this, from staff forums to suggestion boxes and even casual conversations.

Nor do employers have to do everything themselves. One important role may be to act as convenors of assistance and collaboration. Employees may be looking to support one another: workplace venues might be ideal for holding sales of affordable secondhand clothes, for example, while the staff canteen can host lunch clubs where staff bring food to share.

3. Why should employers bother?

For those employers that in recent years have invested in establishing their purpose and values, failing to support employees in their time of need could attract adverse attention from key stakeholders. Their commitments to community and social responsibility—made both publicly and to their own staff—may now face a test. 

Leaving aside the possible accusations of hypocrisy, there are other hard-headed reasons to act. Staff struggling with financial difficulties are unlikely to perform at their best. One recent report by the UK’s Chartered Institute of Personnel and Development, the professional body for human resources, found that more than one in four employees felt that money worries had affected their performance at work. 

Then there is the question of recruitment and retention. Skills gaps and labor shortages are currently holding many businesses back. In this context, staff who feel their employers do not value their contribution or provide the support they need will not hesitate to move on.

Caveat!—They may not thank you

While Professor Narasimhan points to several initiatives that will be of significant help to employees, he also highlights a rather sorry downside for employers—they shouldn’t expect much praise and gratitude. According to one study, co-produced by IMD authors, employees tend to discount support given by employers and do not see the need for any reciprocity.

Organizations that take positive action to protect their staff from the cost-of-living crisis may be disappointed by the magnitude of reaction from the workforce. But it is not all bad news for business leaders. Employees do at least appear to attribute leadership qualities to managers who give them useful support, and that has value of its own especially in these challenging times. 

IMD is a top-ranked business school, expert in developing leaders, transforming organizations and creating immediate and long-term positive impact.

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