When we talk about employee benefits, a general feeling of welfare comes to mind. Solid insurance, gym facilities, fruit baskets in the office, and maybe even a once-in-a-year team vacation. But when we talk about a recession, the feeling is quite the opposite. Images of empty desks and boxes full of personal items jump to mind. So how can businesses manage to offer benefits during tough financial conditions?
Managing a business during an economic recession
Fortune 500 companies have for long mastered the art of planning. This planning allows them to weather the storms of financial markets and repeatedly come out on top. The secret to this sustainable outcome has always been two folds.
First, they are good at planning and managing cash flows. Similar to smart households, these big conglomerates reserve their cash in the times of prosperity to create emergency funds for tough times, which allows them to go hunt for great talent or disruptive technology during an economic downturn. This is mostly because of solid cash flow and financial backup.
The other side to that coin is talent. Big multinationals understand that cash is king but they also know very well that talent is the emperor of them all. Not only do they manage their cash efficiently, they go above and beyond to build an employer brand that makes them more appealing as a dream job for special talents.
What’s good for people is good for business
Employees are the biggest wealth-generating assets for a company. During a recession, it becomes more crucial to retain employees as it can minimise long-term losses for a company. A recession is also a difficult and uncertain time for employees who seek a long-term and reliable job to fall back on. Businesses that make an impact on the world are able to do so when their employees are committed to giving their 100 percent.
The UAE offers some of the best employment opportunities in the world and draws expatriates from around the globe. But in the wake of the worldwide financial downturn in the aftermath of COVID-19 and the ongoing Russia-Ukraine conflict, the economic landscape in the UAE can pose certain challenges for both companies and workers alike.
These impending challenges have led the UAE government to launch multiple initiatives to enhance social security and extend its safety net to include foreign workers. These include the recent changes in the UAE’s labour laws that are aimed at enhancing the financial stability of businesses and protecting the rights of employees. The country has also upgraded its visa conditions to make it easier for foreign workers to continue to sponsor their families even when in between jobs.
Why is it important to retain employees?
The level of employees’ happiness can predict their performance at work. Employees are a company’s most valuable assets. However, they face tremendous financial strain during an economic recession, and as a result, they may choose to explore other employment opportunities that may offer better financial terms along with other benefits.
Losing employees during a peak recession is more likely to result in a loss than a profit. This becomes even more challenging if a company loses a valuable worker holding a key position, resulting in the need for an immediate replacement. Not only replacing and training new staff is a long process, it also has a negative financial impact because recruiting, hiring, and training a replacement employee costs money. If an organisation regularly fails to retain its employees, it can face a substantial financial loss.
Furthermore, maintaining good staff morale is critical when times get tough. This may be achieved through effective communication, training for ongoing professional development, effective feedback, actively pursuing and acting on employee input, managing transitions, and offering perks for outstanding performance.
How to retain employees during recession times?
It’s clear that during economic recession times the pressure on business cash flows is intense, so is the sense of financial stress of employees and their families. But what if both the business and its employees can agree on the same objective, survival? This will turn your employees into fighters. They fight for the survival of your business, because it means the survival of them and their families.
In tough financial conditions, businesses rush to cut their costs to a minimum, so does employees or households in general. If the leadership of the business can find the balance between cutting business costs while helping employees also lower their expenses, manage their finances better, and not be drained by financial stress, this would be a win-win scenario for everyone involved.
Business leaders, owners, or managers have a big role in helping those businesses not only survive but also build a positive culture within their organisations. Here are a few actionable employee benefits every business can offer today, without having a big impact on its cash flow.
Flexible work policies
Workers in the post-COVID-19 world are resisting full-time return-to-office for various reasons. The flexibility they have enjoyed over the last two years has given employees (and employers) a taste of what’s possible.
Flexible work policies can be a great perk that can be added to employees’ benefits package, if it isn’t already part of it, especially during economic recession times. With workers worried about their finances and unsure of what the future holds, a flexible routine will allow them to stay close to their families, enjoy a better work-life balance, and save on additional expenses incurred when commuting to work, maintaining office wardrobes, and eating out. On the other hand, companies can also reduce on-site overheads.
In the UAE, as per the new labour legislation, private-sector employees now have access to flexible working alternatives, something that was previously unattainable. The updated labour laws now offer different working models including remote work, shared jobs, part-time, temporary, and flexible employment contracts.
End of service gratuity schemes
Securing employee’s end of service gratuity is an important factor that workers need to be clear on and feel confident about as they continue to work for a company. Also, the knowledge that the company they work for is financially stable becomes more crucial during a recession.
Offering a well funded, and professionally managed end of service gratuity scheme is in line with the new labor laws. It offers employers the flexibility of paying their gratuity liability on monthly basis, while offering employees the financial safety knowing their hard earned money is well preserved and available at the end of their service.
End of service gratuity is mandated in the UAE. The exact amount is calculated as per the length of employment and must be paid within 14 days of termination or resignation. Employees who have provided services for 1 to 5 years are eligible for 21 days of pay for each year of employment and 30 days of pay for each subsequent year beyond the first five years. The entire end of service gratuity cannot exceed two years’ wages as per the local law.
Financial support programmes
Well-rounded financial wellness plans can play a key role in retaining employees. These primarily involve end-of-service gratuity schemes, workplace savings plans, and financial education but can also include financial aid and family support such as housing and education support schemes. These can be a major benefit to employees especially during peak recession periods.
Top-rated financial wellness programmes also educate employees on a wide range of subjects such as budgeting, debt reduction, financial goal-setting, and more and help change employees’ perceptions about spending and saving. Well-created financial wellness programmes can help reduce money-related stress in employees and increase their job satisfaction levels.
Employers must be transparent with their workers and have well-placed strategies to deal with the economic downturn. This will alleviate some of the pressure felt by employees. Establishing employer-employee trust is also critical, especially during difficult economic times. A trust deficit can lead to an employee seeking alternative career opportunities.
Businesses have much to gain by making their workers feel safe and secure in the knowledge that they have jobs they can rely on so they give their best when times get tough. SMEs can do so by offering flexible policies, adjusting workers’ pay, and ensuring that they have some form of financial support to offer employees such as short-term loans at no extra cost.
FinFlx’s objective is to help promote financial wellbeing by first securing the financial position of the employer so they can gain the confidence and trust of their employees. We make is easier for businesses to start offering a workplace savings plan and secure their financial position against gratuity liabilities.