Over 30% of employers plan to give Christmas hardship loans or bonuses

Nearly one-third (30%) of employers are planning on giving hardship loans or one-off bonuses to staff in the run-up to Christmas, according to new research from WorkNest.

More than one in five of those asked (22%) also said the financial support would be for all employees, whilst ten per cent only plan on giving the one-off payments to some employees.

However, as companies plan to offer the benefit to support employees through the rising cost of living, HR experts have warned businesses to exercise caution around this type of benefit.

Hannah Copeland, HR Business Partner at employment law and HR support firm, WorkNest, said:

“It’s important to remember firstly that the current crisis that is stretching people’s personal finances is not because pay growth is weak, it’s that prices are running even higher, and that’s not something an employer can simply ‘fix’ or provide a direct solution for.

“The issue with one-off payments is, whilst it might temporarily solve a financial deficit for employees, that payment isn’t something which will sustain a healthy and self- managing improvement in cost-of-living quality of life. One-off bonuses also risk setting an expectation due to an “I had it last year, so should get it this year too” mentality which isn’t helpful for employees’ personal finance planning.

“Union leaders have also spoken out against one off payments as a ‘solution’, arguing that something more sustainable is needed. More sustainable support starts with conducting a proper review into pay, compensation, rewards and benefits packages as a whole. What worked five to ten years ago, might not cut it today. Optimise your current offering based on what matters to employees right now, namely money. Overtime, flexible working hours and company-funded pension schemes are all in-demand work perks too that can directly benefit employees financially and are incentives that employees could value most in the current climate.”

Toyah Marshall, Principal Employment Law Adviser & Solicitor at WorkNest, warns about potential legal implications:

“Whilst a hardship loan may be paid as a one-off, there is a difference between a one-off bonus payment and a hardship loan. A bonus isn’t paid back whereas a loan is. So be sure to first understand what you’re offering and use the correct wording. A business is essentially operating as a bank when you start offering loans.

“With a loan, the key is ensuring an agreement entered into that sets out the terms of the repayment. Without it there is no guarantee you will be able to recover it from the employee should they leave their employment.”

The research also found that 60 per cent of businesses asked haven’t spoken to their employees about the cost-of-living crisis and 37 per cent of employers have received grievances around employees feeling underpaid due to salary inflation.

Hannah Copeland added: “With the cost of living rising so significantly, it may not always be practicable for all employers to keep up with the high wage increases requested, particularly SMEs who are facing rising business costs in other areas too. They must therefore be equipped with alternative measures to support employees’ overall financial wellbeing. First and foremost, embracing and normalising the conversation about money and secondly, having well-researched and practical signposting to money and debt advice services.”