Inflation has been on an upward trajectory for the better part of 2022, with no signs of abating. For instance, the UK's inflation rate increased to 10.1% in September 2022 from 9.9% in August.[1] For hospitality staff and the wider population, the outcome is an unprecedented cost of living crisis and financial distress. Supporting staff during these tough times should be a top priority for hospitality employers, especially if you’re geared at retaining your people in a competitive job market. 

In this article, you’ll find out how economic downturns impact your HR department, and employee well-being. You’ll also learn how to communicate these issues to employees, and discover different ways to devise cost of living help for workers.

How Economic Downturns Impact the HR Strategy

An economic downturn makes it challenging for HR to retain staff, and makes it even harder to recruit new employees to fill open positions. HR managers are seeing value in retaining existing employees rather than dipping into the hospitality jobs market for new staff. While increasing salaries and compensation to meet employee expectations could help, not all businesses have this capability given their already constrained operational budgets and ominous economic outlook. Because of this, HR managers in the hotel industry are focusing on supporting staff by enhancing the existing benefits package. When a reward program is already in place, all that needs to be done is refine and improve it to better suit the evolving demands of the workforce.


→😃 Are you looking to make your HR department leaner and cost-effective? Learn how outsourcing HR services can help you achieve this goal, and what to be mindful of. 

What the Cost of Living Crisis Looks Like in Numbers 

The effects of an economic downturn are felt across the board, and more so in travel and tourism, which is mostly an early casualty of personal and family budget cuts. This year, inflation has been rising in most countries, with food and fuel prices at a record high. For instance, the inflation rate in Italy increased to 11.9 percent in October 2022, reaching a 38-year record high. In France, the inflation rate increased from 5.6% in September to 6.2% in October 2022, the highest level since June 1985. In the Middle East, the average consumer price inflation is 6.3% according to information from GlobalData.[2]

Why Supporting Staff Is Critical During the Cost of Living Crisis  

Typically, inflation reduces our buying power, and when the consumer price index increases, it can be challenging for employees to manage their finances. Consequently, employees (just like everyone else) tend to have less disposable income, and are unable to afford that which they could previously buy. This can increase the stress employees are facing in their personal life. If the HR team fails to address these concerns, some employees may opt to leave for higher-paying jobs in order to stay afloat. In an industry struggling with high turnover rates and still reeling from the pandemic after-effects, losing staff can deal a significant blow to the recovery process.

There are two significant reasons why companies require helping employees cope with inflation. First, the Great Resignation is slowing down, but turnover is still pretty high. Employees who are struggling to make ends meet may be more inclined to explore alternative employment. Keep in mind that hiring new employees can mean paying higher salaries, in addition to spending money on hiring and training..

Secondly, when employees are worried about their finances, it keeps them from excelling in their hospitality jobs. Constantly worrying about their debts and future may cause their productivity and mental health to suffer. According to BrightPlan's 2021 Wellness Barometer Survey, financial stress affects an average of 15 hours of missed productivity and engagement every week. [3] By giving your staff more financial security, you also increase productivity and morale.

The aforementioned reasons can also help hospitality managers get buy-in from key stakeholders such as the board of directors and hotel/restaurant owners. Sometimes it can be daunting to convince these stakeholders why investing in employees' welfare at this challenging time is critical, but demonstrating value for doing so can help win the argument in favour.

Employees are the backbone of any business, so employers should place a high focus on their welfare.  Supporting staff can help them withstand the inflation storm and boost their morale. 


How to Talk About the Cost of Living Crisis With Employees

The key to navigating compensation and benefits during high inflation is ensuring clear and ongoing communication. Make sure your employees have a secure platform to express concerns. Additionally, ask your staff to suggest their areas of support rather than learning about the situation during exit interviews or from the grapevine.

By conducting a staff wellbeing survey, you might have a better understanding of how the growing inflation is affecting them. Once you understand their main concerns, you can tailor your response and provide the necessary support. Also, get to know what other hotel sector players are doing in supporting employees to cope with the cost of living situation. Let your employees know that you are aware of the challenges they are experiencing, and that you desire to support them through. Here are some ideas to ensure workplace communication remains open during this challenging time:

  • Give each employee a direct line of communication.
  • Hold monthly online targeted group conversations to explore the effects of rising living expenses
  • Be consistent in how frequently you provide feedback or make key announcements.
  • Deliver a clear message to the intended audience especially when communicating with employees spread out across different locations.

Devising a Suitable Reward Strategy During an Economic Downturn

During economic downturns, everyone immediately focuses on payroll budgets (which appear to be rising above the past years) as labour markets constrict and inflation skyrockets. Hotels and restaurants need a clear plan for allocating salary increases while prioritising the most valuable staff and in-demand positions. Typically, employers don't consider inflation when setting compensation budgets but concentrate on the demand and supply of talent.   

Non-financial incentives, however, can be a great way of rewarding employees without increasing your payroll expenses. Here are 5 non-financial incentives you can deploy to boost your reward strategy:

1. Provide Financial Education Training

Hospitality staff can better prepare for and adapt to the present inflationary environment through training on budgeting and financial planning. When employees are trained on money-saving tips and how to navigate their debts, you give them the tools to make personal adjustments to their finances.

2. Consider a One-Off Inflation Bonus

If you're a small- to mid-sized hotel/restaurant, company-wide raises might not be in your budget. Another option is to provide a one-off cost of living payment. A one-time incentive provides immediate financial assistance without committing to a long-term rise in your payroll expenditures.

3. Create a Well-being Program

Employees are often burdened by financial worries, which frequently have a negative impact on mental health. Offering mental health programs can help employees cope with negative effects of economic downturns. Read this article for excellent employee wellbeing program ideas! 

4. Provide Discounts

Hospitality employers can provide discounts as a way to support employees during economic downturns. Examples of discounts can include grocery, housing or commuting discounts, which can save your staff a significant amount of money on their already squeezed budgets.

5. Provide Remote Work Options

Take a look at how your current workplace arrangement generates extra costs for your staff. For instance, you can allow some hospitality staff to work from home to help them save money on transport, gas and energy bills. Besides saving money, flexible working options can also raise employee morale, especially for employees juggling family and work responsibilities.

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  1. Consumer price inflation, UK: September 2022, Office for National Statistics
  2. Consumer Price Inflation in the MENA Region in 2022, GlobalData
  3. Financial stress costs employers $4.7 billion per week, 2021 BrightPlan Wellness Barometer Survey