Across Europe, workers are experiencing financial fragility and job insecurity at alarming levels. The cost of living crisis – and a high number of open job vacancies – are putting even more pressure on companies to treat their staff compassionately.
That’s especially true given how widespread the problem is. Far from being a niche challenge, according to work by the European Parliament’s Eurobarometer, more than seven out of ten respondents from across the EU recently said they were worried about paying the bills. In Greece, moreover, a full 100% of people reported feeling this way, with these eye-watering figures echoed in responses from people in Cyprus (99%), Italy (98%) and Portugal (98%).
Poverty and social inclusion follow concerns around the rising price of goods, with 82% of Europeans stating that they’re anxious about paying their way. With the price of necessities, including energy and food, dramatically rising, this is a fear felt across Europe, irrespective of age and gender differences.
Financial volatility, individual vulnerability
In this volatile environment, CFOs have competing interests to fulfil. On the one hand, the cost of living crisis and job shortages are forcing many workplaces to increase wage rates. On the other, they have to deal with the ‘cost of doing business’ crisis – focusing their attention on where the company can make savings.
“CFOs have a difficult balancing act to perform,” emphasises Charles Cotton, senior reward and performance adviser at the Chartered Institute of Personnel and Development (CIPD), an association for human resource (HR) management professionals.
The UK, for its part, arguably epitomises the challenge facing CFOs in this respect. As Cotton puts it: “In the wake of the pandemic and the NHS crisis, many existing staff are looking for employers to provide more health and well-being benefits.”
Currently, 12,000 companies in the UK are accredited as so-called ‘Living Wage’ employers, with more than half signing up for the cause since the pandemic, findings from the campaigning organization reveal. Businesses that have pledged their commitment as a Living Wage employer pay independently calculated Living Wage rates: currently at £10.90 an hour across the UK and £11.95 in London. To put that into perspective, the UK’s current minimum wage is currently just £10.42.
Despite these successes, however, only one in nine people across the UK work for a Living Wage employer. As the cost of living crisis, and ongoing inflation combine to create further financial unpredictability, it is plunging people deeper into financial hardship. Furthermore, over 3.5 million people are still paid below the actual living wage in the UK – with predictions anticipating this will increase to five million by the end of 2023.
More to the point, these challenges are impacting what workers expect of their employers. According to research by global employee pay company CloudPay, 60% of employees have raised concerns about how they would pay for an emergency. Furthermore, 70% of executives say responding to employees who want to be paid before payday is their payroll team’s most significant challenge.
“In response to the cost of living crisis,” Cotton says, “employees are looking for workplace benefits that help reduce their living expenses, such as grocery bills or transport costs.”
Shifting and shaping
What do CFOs themselves think of their responsibilities? In today’s corporate landscape, they have three main responsibilities, Jean-Bernard Moens, the CFO of Omio, a German online travel comparison and booking website, says. Fundamentally, a CFO’s role includes supporting the CEO to challenge the management team; represent the company to financial investors and the board of directors; and run the finance function. In the post-Covid era, however, the nature of work has changed. Prospective and existing employees’ demands for an effective and supportive working environment have evolved. To put it differently, the pandemic has raised questions about the demands placed on CFOs today, as they respond to the shifting working environment.
“While the responsibilities themselves have not shifted through the pandemic, the weight of each responsibility has definitely changed,” argues Moens.
Throughout the pandemic, Moens says that his responsibilities were managing the company’s cash burn and trying to keep it to a minimum. He achieved this by tightly steering the management team and working to navigate through the crisis with the help of investors.
“Now, after the pandemic,” Moens adds, “the role is more about ensuring the company is on a path towards profitability.”
Yet, if CFOs must apply increasing focus on profitability in the post-pandemic corporate sphere, it raises the question of whether there needs to be more emphasis on supporting individual employees entering, remaining and progressing in companies. At the same time, it obliges executives to ask whether this is the CFO’s responsibility – or that of someone else within the organisation. For Moens, the pandemic has shaken the role CFOs play in balancing individual prosperity with corporate profitability. “We should never balance one with the other, as it is not a zero-sum game,” he says. Omio, for its part, strives to have a strong performance culture, and Moens adds those who perform are both appreciated and rewarded.
This makes sense. As Moens emphasises: “Your highperforming people provide ten times more value to the company than they cost.” Even so, employers need to adopt a process that steers away from exclusively pushing performance, instead encouraging them to develop a get up and go attitude. “The challenge is to help show people what value they generate,” is how Moens puts it.
Each team member, therefore, needs to know how they influence their firm’s profit and loss. To achieve these markers, it is the management’s responsibility to put in place a thoughtful performance culture and measurement system – making sure to apply it consistently and fairly throughout the organisation.
“Where resources are tight,” Cotton adds, “it makes sense to focus attention on low-waged workers who are most at risk of financial insecurity.” Leaders have a variety of options available to them to provide support to their employees. Companies can commit to paying a liveable wage. They can offer financial benefits that stretch the value of the pay packet and provide perks that protect staff from financial difficulty. Employers can also signpost employees to sources of financial guidance and help.
Prioritising pay policies?
With competition for jobs being fierce, meanwhile, companies should also consider whether generous pay policies can retain staff and boost efficiency. New insights from talent services company Morgan McKinley reveal more than 57% of global employers are worried they will lose staff in the first half of 2023 – due to their ability to earn more elsewhere. Companies, therefore, need to improve the financial support available to retain their staff. While pay is obviously essential here, other factors matter too. The opportunity to work flexibly, for instance, or the provision of training and development, all influence a person’s choice of employment.
People in existing roles and seeking new opportunities want more than a generous pay policy too. As Cotton says: “CFOs can’t just assume that paying more than the competition will be sufficient to attract and motivate the best talent.”
In a similar vein, Moens argues that “highperforming” staff need to feel challenged and engaged in their work. As the CFO has found at his own company, achievements – rather than money and bonuses – drive team members who adopt this approach to their career goals. In this context, then, if a company has a sound performance management system supported by a motivating and fair compensation policy, Moens believes that companies “can keep the best people with you for a very long time.” Omio, for its part, strives to offer a wide range of long-term incentives – such as a stock option plan to attract these sought-after, high-performing people.
“Similarly, while pay can incentivise employees to be more productive, this will also depend on them being given what they need to be more efficient,” adds Cotton. People need to receive these provisions – which include appropriate training and development – and then be given the opportunity to use their skills and equipment to support their employment.
Beyond these incentives, these people must have a real possibility to influence the outcome of those plans. They need to feel they can drive the company’s value to believe in those plans and therefore want to stay with the company in the longer term, see it grow and work together to achieve mutually-beneficial goals.
Colleagues who live the company values form teams. Recognition and access to new opportunities, such as more significant projects and complex features, are vital to growth. “Yes, compensation needs to be fair,” argues Moens, “but to keep your team engaged, there needs to be interesting work that has meaning and creates impact for the company.”
Elevating employee expectations
Amid the cost of living crisis, existing employees are looking for more health and well-being and wider workplace benefits to help reduce their living expenses. Some younger job seekers also have concerns regarding whether their new employer will be fair and ethical. For example, people looking to enter a new company might ask what actions the firm is taking to reduce its gender or ethnicity pay gap or how it meets its climate and environmental responsibilities.
Employee benefits platform developer, Amba, which undertook a poll with 1,000 of its workers for its Generation Gap Report, found that over two-thirds (69%) of respondents felt it was important their employer has strong ethics. Further, over three in five look for an employer who shares their values.
In addition, investors and customers are becoming more interested in how the firms they invest in or buy their goods from treat their workers – by asking questions such as, for example, whether they pay a living wage. Given all this, it’s unsurprising that there would be growing calls for a more holistic approach towards fulfilling staff demands. For CFOs, this potentially demands more of them. A high-ranking role traditionally confined to looking after the numbers now requires them to ensure the business’s financial security while also meeting individual needs far beyond money. Can CFOs manage these demands? Perhaps a more pertinent first question is whether it’s even the CFO’s responsibility to do so. As Moens argues: “Keeping employees motivated and engaged is a challenge best tackled by the whole leadership team – not just the chief product officer or the CFO.”
CFOs can, however, help the organisation understand what motivates employees and deploy financial support to set up other advantages, such as non-salary benefits. In addition, Moens believes that finance directors “can relentlessly work at improving the valuation and liquidity of the company’s stock so that employees see the long-term benefit of their incentive plans.”
The CIPD agrees. “It would be unfair to expect CFOs to be people experts on top of their job as financial experts,” says Cotton. In most corporate environments, the CFO will work with people specialists in the HR and payroll teams to ensure that the money spent on reward packages meets the needs of the business – and of current and future staff.