BLOG
Cost of living pay rise guide to managing employee requests fairly
(Updated in February 2026)
The cost of living is continuing to outpace UK wage growth. As a result, along with widening skills gaps and a mass exodus of talent, your business should look to support staff effectively.
With pressure mounting and resources tight, this is a scenario outsourcing to an HR consultant specialist can help. You must take this opportunity to equip leaders with the tools to navigate this situation in a healthy and effective manner, which our insights across this guide offers.
Do you need support?
Speak to us for an honest, no obligation chat on:
0345 226 8393 Lines are open 9am – 5pm
Is a cost of living pay rise compulsory?
No, it isn’t mandatory for your business (unless it states clearly in an employee’s contract of employment). As the employer, you’re legally required to pay National Minimum Wage (NMW), or the annual stipulated in a member of staff’s contract.
However, you may want to consider raises to help support employees with the rising cost of living in the UK. This can help improve workplace productivity and manage staff retention.
Possible alternatives to pay rises
You should be equipped with alternative measures to support business and employee needs. For instance, you may feel more able to consider whether you can offer further financial support to individuals through your broader benefits offering.
Flexibility here is key, and it falls to HR and people management teams to help companies understand whether there is scope to offer initiatives such as:
- Interest-free loans for buying travel season tickets, or childcare vouchers for tax savings through salary sacrifice schemes.
- Employee Assistance Programmes (EAPs) provide employees access to support in areas such as mortgage advice, financial planning, and debt management. Many EAPs will even supply counselling to help employees manage the emotional challenges that often accompany financial difficulty.
- Schemes that already exist within the business which employees don’t know about. HR has an important role here in communicating what is available and encouraging maximum uptake.
In making these efforts in the modern age, an increasingly popular approach is to become more data-driven as an organisation. This way, you can offer employees a package that matches their needs but also those of the business.
And despite the inherently financial nature of the current cost of living crisis, it could even be worth thinking beyond this realm in some cases. For instance, you may find that some employees would be willing to forego a pay rise in lieu of a more structured and advanced personal development plan, or a healthier work-life balance.
Initiatives such as these can have a profound effect when it comes to effective employee retention strategies, which may help save your business money in the long-term.
Normalising pay-related conversations
Finally, the cost of living crisis arguably presents employers with a golden opportunity to address a critical but often overlooked cultural tenet – the level of transparency within an organisation when it comes to financial matters.
On the most basic level, this openness can be exercised during the pay review process. Yearly pay reviews are recommended, unless your business operates performance-related pay, in which case individual objectives can be linked directly to business performance.
Even if the review doesn’t lead to a pay rise, it’s vital to demonstrate that a certain degree of thought and communication has gone into looking at salaries and considering whether one could be applied.
At this stage, you can then take the opportunity to lay out a set of goals and KPIs for the individual to work towards. This will give them a greater sense of visibility and control over salary progress, and will quite possibly keep them engaged as a result.
But these conversations should not be taking place merely as a reaction to the current climate; rather, the organisation must seek to normalise this type of open dialogue.
Working with HR is paramount when it comes to navigating wage discussions, as you shouldn’t fall into a trap of offering pay rises based on individual needs. This might be the temptation given people’s differing circumstances and struggles. Instead, there should be clear structure surrounding pay and promotion.
Specialist support with pay and rewards
Pay is one of the most common causes of employer-employee disputes. With relationships between organisations and their workforces already fraught as a result of the pandemic, it’s important to get it right, and to take swift action when a complaint arises.
From advice on navigating pay-related conversations to hands-on help producing policies and conducting pay benchmarking exercises, WorkNest’s qualified Employment Law and HR specialists are on hand to help you minimise issues, retain your workforce, and set salaries that are fair, motivating and viable for your business.
For support, call 0345 226 8393 or request your free consultation using the button below.
