How flexible pay can boost UK's productivity

The UK economy is struggling amid a cost-of-living crisis with millions of households in economic hardship. The change of leadership with the appointment of Rish Sunak as prime minister has raised discussion on how the economy can be kickstarted.

An area which has been highlighted is the UK’s low productivity levels. Nothing is more important to a nation’s prosperity, to improving living standards, boosting growth, and taming inflation than strong and sustained productivity growth.

 The UK experienced no productivity growth between the first and second quarters of 2022. Figures released by the Office for National Statistics (ONS) show that between the first three-month period in 2022 and the second, productivity in the UK stagnated.

 While output per hour worked in the second quarter was 1.7% higher than pre-coronavirus pandemic levels, output per worker fell by 0.6 % indicating that more people entered the workforce. The UK government should look at initiatives to improve productivity levels but there should also be an onus on individual businesses.

 Businesses should assess why their employees are being less productive. While there may be varying factors, one which shouldn’t be overlooked is the employee’s financial wellbeing.  A study published this year, revealed that businesses are suffering a drop in productivity due to employees feeling the burden of financial stress.

 The study took evidence from 2,200 employees and found 71% of professionals are experiencing moderate to high levels of stress. The survey shows the cost-of-living crisis is causing those who experience financial stress to feel fatigued. 48% of those experiencing financial stress report terrible sleep quality and 47% say this is leading to anxiety. All of which is influencing productivity.

 This backs up previous findings by Close Brothers in the 2019 Financial Wellbeing Index which highlights that 94% of employees worry about money and 77% say this affects their work. In Australia, an Impact Economics and Policy report  found that lost productivity due to poor mental health in New South Wales could amount to $7.5bn if more is not done to support workers.

 UK companies can improve their own productivity levels and support their workers by enhancing employee’s financial wellbeing. A way in which this can be achieved is by offering employee’s more frequent and flexible pay.

This would give employees greater control over cashflow and allowing for more efficient budgeting. It would also reduce the likelihood of people using loans and credit meaning concerns about long-term debt are lessened.

Employers would also benefit as enhanced employee wellbeing improves productivity, can help attract and retain talent, while reducing absenteeism. This makes business more efficient and ultimately more profitable.