What is In Work Poverty?

In Work Poverty is defined as when a working person’s income, after housing costs, is less than 60% of the national average and they therefore don’t earn enough to meet the cost of living. One in eight workers in the UK were already affected by this before the cost-of-living crisis emerged this year (2022).

But In Work Poverty is not a new problem and has been growing since the 1990s with incomes failing to keep up with growing costs for lower income, working households.

Many households are facing a huge cost-of-living challenge with inflation rates at a 30-year high (rising to 5.5%) and soaring energy, food and transport costs impacting us all. The increase to the National Living Wage this month (April) of 6.6% will fail to be enough to offset the rising cost of living. The Office of National Statistics recently reported that nearly 1 in 4 adults have said coronavirus was affecting their household finances, with top concerns labelled as reduced income, using savings to cover living costs and struggling to pay bills.

In Work Poverty is not only limited to those in the lowest paid roles but people in:

  • Families without full-time workers

  • Single-parent families

  • Families with a disabled person

  • Families with three or more children

  • Rented accommodation

  • Families with childcare responsibilities

  • Irregular hours work

Other unexpected factors can also result in people falling on hard times too: being made redundant, having hours cut, an influx of unexpected bills and expenses, events such as birthday’s, school holidays or trips and Christmas.

With many households facing the burden of reduced income and companies either cancelling or postponing their annual salary review or bonus schemes, it should come as no surprise that financial security tops the list of issues employees are concerned about (Covid HR-Pulse, 2020). The YouGov survey which collected data from 2,557 employee’s found that 12% said their pay was not high enough for them to have an acceptable standard of living without going into debt paying for food or bills. Similarly, 27% said that their current level of pay was not enough to cope with a £300 emergency without having to dip into savings and just under half (47%) said they earned enough to save for retirement.

Interestingly, the University College London’s COVID-19 Social Study, which is based on the opinions of 28,495 people between the 21st and 27th March 2022 in the UK found that people were more worried about their finances (38%), than catching COVID (33%).

With energy bills having increased by an average of 54% per household, some employers are taking the proactive step to give their team an annual pay rise to account for the extra cost-of-living, in addition to their usual annual salary increase in line with inflation.

If this was a step that businesses were planning to take to support their employee’s financial wellbeing, they should consider the tax implications first of all and if the amount was subject to pension contributions.

There are plenty employers can do to mitigate the rising costs of living for their employees, whilst also keeping business costs low, to support and engage them by introducing meaningful initiatives which can significantly lower their day-to-day outgoings.

What Can Employers Do?

  1. Pay a Fair and Liveable Wage: Apart from providing a liveable income that prevents people falling into hardship in the first place, the cost-of-living crisis and recruitment competition for talent during the great resignation should motivate employers to adopt a financial wellbeing policy or improve and update their existing one to support employees to plan, know what their income will be and know how to meet an unexpected cost.

  1. Ways to Foster Fairness:

  • Transparency in how pay is set and how employees can move up the pay grade

  • Advertise all job roles with the salary and wage ranges

  • Pay a wage which allows people to meet the cost of living

  • Remove any barriers which prevent individuals from working the hours necessary to meet their financial needs

  • Ensure that pay outcomes and processes are fair i.e., the gender pay gap

  1. Provide Financial Wellbeing Support: Where employers can support staff through the current pressures of the cost-of-living, they are likely to reap the benefits of this in terms of loyalty, retention, and a healthier more content workforce. Research has shown that poor financial wellbeing can affect the quality of our work, reduces productivity, and can lead to increased absence (CIPD 2022).

  1. Ways to Offer Support:

  • Highlight relevant financial advice and guidance to employees – many EAP’s also offer financial as well as mental health support

  • Create a safe place where employees can speak openly about any money worries or financial difficulties

  • Implement a Financial Wellbeing Policy which signposts the above. You could also provide subsidies for utilities, travel, childcare or food and leisure if possible – employee discount programmes (EAP’s) can provide employees the ability to increase their income with access to instant discounts at hundreds of leading retailers in the UK and Ireland.

  • Providing employees with sick pay or crisis loans can help to protect them and enable them the time off needed without risk to their livelihood / a rise in presenteeism.

  • You could even ease the burden of making technology and white goods purchases by offering free financing with a technology salary sacrifice benefits.

  1. Support in-work Progression: For those living in poverty, a way of developing skills or providing a clear role progression ladder can make a huge difference and potentially avoid people getting stuck on low pay.

  1. Ways to Maximise Progression:

  • Creating a culture of learning and development

  • Promoting flexible working to ensure nobody is overlooked regardless of their personal circumstances

  • Have a clear pay structure

You can use the Minimum Income Calculator to see if you earn enough for a decent standard of living –https://www.minimumincome.org.uk/

Help & Support

If you or someone you know is struggling to meet ends meet, then please refer to the following for support and advice:




or visit the Gov website for further information.