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LONDON — Britain’s financial sector is being urged to do more to help workers struggling with the cost-of-living crisis, despite a slew of top banking names providing one-off payments to low earners.
Nationwide announced on Aug. 15 a payment to more than 11,000 employees to help with the increasing cost of living. The payment is aimed at those earning £35,000 ($42,300) or less a year, which is 61% of the workforce.
“The months ahead will be worrying for many people and we’re always considering new ways to help our members. But rising prices affect our colleagues too and that’s why we’re providing this additional support,” Debbie Crosbie, CEO at Nationwide Building Society, said in a press release.
The world’s largest building society — an organization which lends capital for the building of property — is the latest in a string of U.K.-based financial institutions offering aid to employees.
The move is a logical one, as the banking industry is reaping the rewards of the higher inflation rate that is strangling so many others.
As inflation — the rate at which prices increase over time — increases, so do interest rates, bringing in more income for banks. The Bank of England launched its biggest interest rate hike in 27 years on Aug. 4, the sixth rate hike since Dec. 16, 2021.
The U.K.’s biggest banks have made billions of pounds as a result of the Bank of England’s latest rate rise, with Barclays, HSBC, NatWest, Lloyds and Santander holding as much as £673.5 billion at central banks by the end of June, according to analysis by British newspaper The Times.
Workers’ rights group Unite the Union has been lobbying for organizations, including banks, to offer financial support to employees.
“We wanted to re-open the pay negotiations that had been closed,” Unite National Officer Dominic Hook told CNBC.
“Typically what happens is the pay year starts in March or April so we’ll have pay negotiations often towards the end of the previous year … So what we were saying is, we agreed it back last year but we’ve now got a cost-of-living crisis so we want to re-open negotiations,” he said.
Some banks agreed to negotiate salaries, while others opted for one-off payments.
Wealth inequality
Lloyds announced a one-off £1,000 payment to 99.5% of its colleagues in June, excluding senior management and executives, while TSB offered the same amount to the 4,500 members of staff earning £35,000 or less.
Virgin Money offered £1,000 to employees earning £50,000 or less in August, and HSBC granted its lowest paid workers a £1,500 cost-of-living payment in the same month.
While these support measures may be welcome boosts for employees, they may not go far enough, said Ruth Thomas, chief product evangelist at compensation software and employee management company Payscale.
“We are seeing practice amongst some employers to pay one-off bonuses to support workers through the cost of living crisis. Whilst these may give temporary relief to lower-earning employees, they do not address core issues of wealth inequality across organizations,” she said.
One-off financial perks also may not be the best way to keep hold of employees, Thomas said.
They want access to earning progression over the course of their employment, she told CNBC.
“In the context of rising cost of living costs and wage inflation, employees make their own assessments of fair wages … With a buoyant labor market, moving jobs still is the fastest way to increase your pay.”
Changes in base pay
Other financial institutions have made longer-term alterations to employees’ salaries.
Barclays announced in June a pay increase for 35,000 of its U.K.-based staff. Those in customer-facing, branch and junior support roles received a £1,200 increase to their annual pensionable salary effective Aug. 1.
The NatWest Group announced in July a permanent 4% salary increase for U.K. employees earning less than £32,000, while Santander offered the same percentage increase to U.K. employees earning under £35,000.
The Co-Operative Bank is offering support to a much wider range of employees. Anybody earning up to £80,000 will receive a £1,000 base salary increase from September. This follows a one-off payment of £300 to those earning up to £30,000 in July.
The bank is “committed to helping customers and colleagues during these challenging times,” according to CEO Nick Slape.
“This change in base pay will apply to approximately 95% of colleagues across the Bank, excluding those already on the highest salaries,” he said.
Salary discussions don’t stop there, however. Unite the Union is already thinking about next year’s salary negotiations.
“We’ll be not that long off from starting to think and talk about what pay rises should be given in the next year, and our claims will definitely be that people should be getting at least inflation,” Hook said.
“We don’t want people to have a real-terms cut in pay. They’re going to need an increase in pay, no question,” he said.
Increased interest rates mean banks should be able to offer higher salaries, Hook told CNBC.
“Their margins are better on things like mortgages — they’re still making big profits, they’re doing very well, so I don’t see why they shouldn’t be able to pay their staff properly.”
Challenger banks have been less forthcoming with one-off staff payments and salary increases.
A spokesperson for Revolut said the organization “will support [its] employees as the cost of living rises around the world.”
“We continually monitor the market and pay our employees in the upper quartile. In July we also introduced a new salary review process, where we committed to factoring in the local rate of inflation so that our employees are getting paid fairly to reflect the rising cost of living,” they added.
Atom, Monzo, OakNorth and Starling did not respond to requests for comment for this article.