Soaring Bills and Income Shocks: A Double Crisis for Workers

The pandemic, rising oil and gas prices, and major market regulation failures have all contributed to the building cost of living crisis. Factors far beyond the control of the ordinary people who will pay the price: a decade high (and rising) inflation rate and further energy bill hikes in spring, both following the biggest overnight cut to benefits in history.

 

It is a catastrophic time to face an income shock. But at a time of record covid cases — income shocks are unavoidable for many workers in frontline and customer-facing sectors, unable to work from home. Workers disproportionately in low-paid jobs and on insecure contracts, left vulnerable by the long-standing inadequacy of their sick pay and employment protections.

 

Thousands of workers face a double whammy — soaring bills and increased income insecurity, and without immediate government action it risks pulling households under.

 

We’re seeing workers’ anxiety erupt in real time

 

 

 

At Citizens Advice, we’ve seen workers’ resulting anxiety erupt in real time. The Prime Minister’s warnings of the incoming Omicron ‘tidal wave’ and new advice to work from home brought an immediate surge in views to our ‘Coronavirus — If you’re worried about working’ web page. Traffic to our sick pay pages was also significant — a pattern we’ve seen throughout the pandemic, with demand strongly linked to covid case numbers and government guidelines.

 

 

This anxiety is well-founded. On top of workplace safety concerns during a pandemic peak — there are justified worries about the hit to pay packets. At just £96.35, the TUC calculates that weekly Statutory Sick Pay (SSP) is £3 less, in real terms, than it was at the start of the pandemic. Some workers won’t even get this: if their weekly earnings average below £120, for example, or if their employer wrongly refuses them SSP — one of our top employment issues at Citizens Advice. We estimate that, in December alone, around 320,000 workers who tested positive isolated without pay or on Statutory Sick Pay (SSP)* — representing a significant cut even for workers already on low pay like Anna:  

 

 

Even workers who manage to avoid catching covid are affected by the knock-on effects: isolating colleagues can mean staff shortages and, in some cases, temporary business closures. Between 27 December and 9 January, 21.3% of all businesses reported they had reduced or paused trading — rising to 38.4% of businesses in the accommodation and food services sector.

 

Industry leads in the hospitality and retail sectors in particular have raised concerns about temporary closures due to covid-related staff shortages. As well as risks to longer-term job security, affected workers face a more immediate financial risk given low-paid and insecure workers are overrepresented in these sectors. While those with guaranteed hours are entitled to full pay if their workplace is temporarily closed unless their contract says otherwise — there is no obligation to pay agency workers in most cases, or zero hours workers like Chloe:

Chloe started working for a hotel on a zero hours contract in summer 2021. In December, her employer sent an email at the end of her shift informing her the hotel was closing immediately and didn’t expect to reopen until some weeks after the New Year.

Chloe contacted Citizens Advice because she was facing weeks without pay and her employer told her she needed to make sure she was available to start work if they reopened early.

Citizens Advice told Chloe she can work for another employer because she’s on a zero hours contract. In the meantime, her income from work has stopped — she’ll need to update her Universal Credit journal and plans to search for a new job.

The circumstances Chloe and Anna are experiencing — temporary business closures and sick leave — are enough alone to risk significant hardship due to inadequate sick pay and protections for insecure workers. In an ongoing pandemic and the cost of living crisis, it’s a perfect storm.

The government needs to do more

There are a host of mitigating measures the government can point to for affected workers: Universal Credit, new grants for businesses affected by the Omicron wave, Test and Trace Support Payments. These are all welcome options — but they’re not solutions. In each respective case, money either doesn’t come in time for the crunch, isn’t guaranteed to reach workers’ pockets, or isn’t reaching the numbers it should. (To reach the estimated number of workers who isolated on SSP or without pay in December alone, the Test and Trace Support scheme would need to pay out the equivalent number of claims paid out in around 11 months in 2021.)

The same workers integral to “rid[ing] out this Omicron wave without shutting down our country once again” are expected to bear the economic brunt of 2 crises. With the cost of living crisis compounding the effects of the pandemic, urgent intervention is vital.

The government should act now to prevent this double whammy by:

• Bolstering affected workers’ incomes while maintaining the employer link: Increase SSP and extend employee protections to insecure workers affected by temporary business closures
• Ensuring existing provisions reach people when they need them most: To be effective, systemic and bureaucratic barriers to timely benefits and isolation payments must be addressed
• Easing the pressure for those on low incomes in the cost of living crisis: In time for April — revise the annual benefit uprating to match the 6% inflation rate, create and deliver an ‘Energy Support Grant’ via the benefits system to help meet soaring energy bills, and make some breathing space by spreading the consumer cost of energy company failures (the SoLR levy) over a longer timespan.