Car retail businesses have been advised to "flex" staff bonuses and salary sacrifice schemes to mitigate against the impact of the cost-of-living crisis as UK inflation continues to soar.

As Office of National Statistics (ONS) data for May showed that UK inflation had reached a 40-year high of 9.1% amid accelerating fuel, energy and food costs, it emerged that the trend had left regular pay falling at the fastest rate since 2001.

Between March and May, pay excluding bonuses was down 2.8% year-on-year when adjusted for inflation – the fastest drop since records began.

Pay including bonuses was down 0.9% when adjusted for inflation.

And MHA employment tax director Nigel Morris told AM that bonuses could be the best way to help staff cope in the volatile economic climate.

“Employers are facing an unprecedented challenge to support employees with the current large cost of living increases whilst still making full employment viable, not least with their own cost increases including NIC,” he said.

“We have already seen dealers flex and amend commission and bonus arrangements to support their income and reward their efforts where vehicle supply has meant a large time difference between sale and delivery.

“The answer is to balance pay increases which are sticky, with bonuses which can support any temporary issues along with balancing remuneration and taking advantage of salary sacrifice and flexible benefit packages to help employees net pay go further for things like cars and shopping vouchers.”

But Morris added: “It is a complicated balance and will require planning, innovation and communication to help employers and employees get through it.”

Retention concerns

Last month under-fire Prime Minister Boris Johnson warned of a “wage-price spiral” being caused if wages are increased in line with rising prices.

However, employees across the UK are reacting to the cost-of-living crisis with strike action and the car retail sector could face a retention issues without action to address the pressure on household incomes.

Commenting on rising inflation and pressure on household incomes today, National Franchised Dealers Association chief executive Sue Robinson said: “Motor retailers are very aware of the cost-of-living challenge for their staff and ensuring pay structures remain in line with the employment market.

“The sector still faces skills shortages in certain areas, particularly within the workshop.

“In order to attract and retain high calibre staff, it is crucial that salaries and employee benefits are competitive.

“Where it is applicable, retailers are also looking at flexible working and other non-payroll benefits for employees, that makes working for their business more attractive.”

In April family-owned franchised dealer group Sandicliffe informed its staff they will receive a special payment of £500 to help them cope with the rising costs of living.

Speaking at the time managing director Paul Woodhouse told AM: "You don’t have to go far to see something in the news about the rising costs, whether it be energy or food, so with this in mind we will be making a payment for an additional £500 to all employees.”

"As a company we appreciate the contribution each and every employee makes to the success of the business and this bonus is only able to be paid because of the financial stability which their hard work generates."