Financial Challenges Faced by Employees in the UK during Covid-19

FINANCIAL CHALLENGES FACED BY THE EMPLOYEES IN THE UK DURING COVID-19 AND THEIR SOLUTIONS
Abstract
The outbreak of coronavirus imposed severe economic challenges for the United Kingdom. As a result, many workers were retrenched, had their wages reduced, and did not get contract renewals. In this regard, they experienced numerous financial challenges that harmed their wellbeing and their families. Due to the exploratory nature of this research, a qualitative technique will be used. Secondary data will be collected from different journals, newspapers, websites and government records to explore the financial challenges employees from different industries have faced and the techniques corporate executives, policymakers, and government officers in the United Kingdom have used during the lockdown to deal with, adapt to, and recover from the COVID-19 pandemic.
Keywords: financial challenges, coronavirus, income, wages.
Financial Challenges Faced by The Employees in the UK During Covid-19 and Their Solutions
Introduction
On December 19, 2019, the first coronavirus case was recorded in Wuhan, China, and later followed by massive cases that caused negative impacts across the globe. With the perceived risks associated with the disease, many governments forced their people to take measures that would curb the further spread of the condition. The virus was reported to be transferred through minute droplets from an infected person and had a higher mortality rate. This sparked among government officials, which mandated the implementation of lockdowns and other protocols to prevent the spread of the virus. WHO reports indicate that more than 380 million people have been affected by the diseases, with about 5.6 million succumbing to death (WHO no date). In the United Kingdom alone, it is reported that the virus has affected more than 17 million individuals and caused more than 150 000 deaths (WHO no date). In order to curb further damage, the government created measures that forced businesses to close down for several weeks in order to limit the movement of people. Moreover, many businesses were forced to reorganize their business structures, including human resource practices, customer relationships, supply chain management, and financial management (OECD and ILO, 2020).
Through the restructuring of the business, there were diverse negative impacts on the welfare of workers. As reports from several experts demonstrated, many businesses had to retrench their workers while others reduced their payments to cope with the challenges in the economy. Since it was a new virus, the coronavirus pandemic magnified the issues of financial insecurity across society (OECD and ILO, 2020). The impact on the employees has been understudied because many people are focused on the economic impacts and how organizations manage the pandemic. Therefore, it is vital to study these components to understand the issues surrounding employee financial wellbeing or challenges during and after the pandemic in the United Kingdom. In many regions across the world, including the United Kingdom, there were many retrenchments, salary reduction, business closure, and reduced working hours. These are aspects that have direct financial implications on workers. Therefore, it is evident that many people had to deal with numerous financial pressures as they were coping with the pandemic aftermath (Rasdi, Zaremohzzabieh, and Ahrari, 2021).
Moreover, the pandemic also destroyed their saving abilities because they were forced to utilize more funds as commodity prices increased, imposing challenges and limiting their purchasing power. It was also during this period when organizations were forced to reduce the working hours of individuals. Reduced working hours and wages during the lockdowns imply that people had lower wages compared to the before the pandemic (Edakhlon et al., 2021). This affirms the importance of undertaking this study, affirming its value in informing policy measures and effective business response during outbreaks. While nations like the United Kingdom rushed to offer support for businesses in form of grants in order to stay operational and protect workers and salaries of people, the impacts of the pandemic could not be controlled further (Joshi et al., 2021).
The study aims to examine the financial challenges faced by workers in the United Kingdom during the coronavirus pandemic, and the solutions to these challenges to assist researchers and economic experts in comprehending emerging financial issues in the post-pandemic period. The study will focus on workers and companies on all sectors located within the United Kingdom to offer a realistic picture or perspective of the financial status of employees.
Literature Review
The Coronavirus Pandemic Effects in a Global Perspective
The occurrence of the coronavirus turned from a health crisis into an economic crisis. This is because many risks were imposed on the economic sphere, including placing workers at risk, affecting job availability and employability, and the income levels of millions of people across the world (ILO & OECD, 2020). With these recorded impacts, the financial implications on workers could also be recorded. The challenges in the economic sphere were caused by containment measures that were intended to limit the number of infections and ensure that the contagious disease is stopped from spreading. Before scientists developed the vaccine, business was forced to close down or reduce the threshold of their activities or operations (Fairlie, 2020). This mandated retrenching the unneeded workforce or restructuring their working hours in order to support sustain the business and provide support to all essential workers. Therefore, there was a need to reduce wages because the amount of revenue in different sectors reduced significantly (Bartik et al., 2020). Therefore, employees were imposed on strict financial positions that they never foresaw.
Further, ILO and OECD (2020) note that there was an evolution of the pandemic "from an unprecedented health crisis to a deep economic crisis" (ILO and OECD 2020; p. 6). Immediately after the outbreak of the virus in Wuhan, China, in 2019, the level of infection escalated faster, making the spread of the virus a pandemic in many countries (Engidaw, 2022). Since businesses were not prepared for this specific crisis, many things changed that had direct financial implications on workers. Another aspect that also affected the financial status of workers was the timing and extent of health containment measures across nations. Depending on the number of cases recorded and the ability of the nation to support its citizens, many people were scrapped from their jobs because companies could no longer sustain the workers (Klein and Smith, 2021). This imposed financial challenges on the workforce and population in general.
According to Biasi (2020), the coronavirus outbreak created financial difficulties for both workers and employers. Similar findings were also established in Sagan and Schüller's (2020) study. As restrictions were imposed on society, including lockdowns, businesses could not operate at their normal threshold. Therefore, it was difficult to break even and meet businesses' financial obligations, especially compensating their workers (Biasi, 2020). In this regard, many businesses, especially those in the transportation and hospitality sectors, had to close down and terminate contracts with workers they deemed unnecessary during the pandemic (Biasi, 2020). Other studies determined that the relationship between workers and human resources was hampered because of the restrictive measures resulting from coronavirus (Spirk and Straub, 2020).
As the virus continued to spread, around 20% of the workers in the United Kingdom furloughed or had their contracts terminated (Allas et al. 2020). From those working at the junior level to those in senior positions, every employee rank had to face pay cuts. According to Joshi et al. (2021), many practitioners were forced to work under pressure in the healthcare sector. In order to meet the new financial demands, healthcare organizations had to impose "impose pay cuts, reduce number of patients, and decreased surgical exposure, and training" for young specialists (Edakhlon 2021: p. 2189). Therefore, this shows how the pandemic imposed financial pressures on workers (Sagan and Schüller, 2020). Another aspect is that young workers were forced to cope with reduced wages and lack of opportunities for training and internships. The lack of exposure to training and internships can also affect their career progress and financial status in the after the pandemic (Edakhlon et al., 2021). Therefore, most of the control measures intended to limit coronavirus’ spread has adverse financial implications on workers.
The findings from these studies are also consistent with ILO and OECD (2020) arguments. As noted earlier, the coronavirus caused pressures that forced companies to restructure their hiring strategies as well as human resource policies. The measures undertaken included reducing pay cuts and retrenching workers in order to reduce the cost of wages. Therefore, as more governments sought to save lives and prevent more deaths, there was a great downside to the employability and operation of businesses (Leslie and McCurdy, 2020). These impacts on business directly affected the financial wellbeing of employees. Most of the measures taken by the United Kingdom has severe implication for business, job availability, and the income level of the workers (Allas, Canal and Hunt, 2020).
Effects of Coronavirus Pandemic Financial Wellbeing in the United Kingdom
The first lockdown was announced on March 23, 2020, to control the virus's spread. While the measures imposed appeared to have stopped the health crisis, the impacts on the economy will be seen for several years in the pandemic aftermath. According to Allas et al. (2020), economic activity reduced significantly after the lockdown was announced. Estimates projected that the GDP would reduce by more than thirty percent (Zhou and Kan, 2021). These findings were similar to projections by Leslie and McCurdy (2020) who noted that the GDP of the United Kingdom would decrease. This was based on indicators such as purchasing managers' index, which demonstrated that economic activities had declined significantly. Moreover, as reported by Allas et al. (2020), the Office of the National Statistics also noted that more than 23 percent of businesses had closed down shortly after the lockdown. This is a clear indication that many people's jobs were affected, hence their income levels. Therefore, we deduce that the pandemic produced negative financial implications for employees (Ehrenberg et al., 2021). Although the lockdowns have been lifted and businesses can continue to operate normally, the risks of job losses and sustainability of paying higher wages are still not possible for many companies (OECD and ILO, 2020). Therefore, even those re-absorbed into their positions after the pandemic is still working with lower wages.
Allas et al. (2020) also noted that the rapid fall in economic activity produced negative implications on employment. After the lockdown was announced, it was noted that more than 7 million individuals were projected to lose their work. These statistics included "permanent layoffs, temporary furloughs, and reductions in hours and pay" (Allas, Canal and Hunt, 2020). The risks are higher because individuals in the lower job bracket are more likely to lose their job. This would render them with no income to support their families and ensure that they can sustainably manage the affairs within their families (Allas, Canal and Hunt, 2020). Therefore, it was vital to understand that one of the major financial challenges resulting from the pandemic was caused by job losses. Another major financial challenge was the reduction in pay because companies were forced to restructure their business hours and pattern to limit the coronavirus pandemic's spread (International Finance Corporation, 2021). Regions like Blackpool, Stoke-on-Trent, and Torbay were projected to be severely impacted by the disrupted financial flow. This is because most of the workers in this region are those of low wages, which would be hard-hit by the effects of the pandemic on income and jobs. When the mandatory restrictions and stay-at-home orders were enforced, informal workers, mostly from areas like Blackpool, could not earn any income. There are also no structures for these workers to be considered in welfare program, such as those enjoyed by furloughed workers. Therefore, informal workers had to deal with many financial challenges during the period.
Dey-Chowdhury (2021) also evaluated the impacts of coronavirus on United Kingdom households and businesses. Moreover, this was undertaken with an international comparison to have a holistic perspective of the impacts and how they could be addressed (Financial Stability Board, 2021). The investigation also evaluated "income, expenditure, dividends, assets, liabilities, and insolvencies" (Dey-Chowdhury, 2021). First, the coronavirus formulated local and national measures across the United Kingdom, further merged with social distancing to minimize its spread. The outcome of the restriction was that there was reduced spending on households and businesses. While there were incentives for financial support for households and businesses, the spending pattern indicates that people were experiencing abnormal financial pressures (Dey-Chowdhury, 2021). There was a rise in government borrowing because the new economic challenges required financial and social interventions that would protect the people from unnecessary pressures (Dey-Chowdhury, 2021).
According to Leslie and McCurdy (2020), regarding household expenditure, there was a rapid decline in expenditure, which is an indicator that most workers had lost their income or had financial insecurities. These findings were consistent with the claims by (Dey-Chowdhury, 2021). It is noted that social consumption was reported to decrease significantly, and most hotels and restaurants did not receive any customers, and if there were any, the number was very small. This made the hotel business unsustainable, and many were forced to close down. The people also did not spend on recreational activities as was before the pandemic. Other directly impacted businesses were reduced expenditure on transport because people hardly moved because of the lockdowns and restrictions (International Finance Corporation, 2021). Therefore, the pandemic caused an economic slowdown that directly affected businesses' job availability and income levels. These, as we have noted earlier, have direct implications on the financial wellbeing of workers and households. With reduced expenditure, businesses cannot operate at optimal levels to pay wages, facilitate business activities, and ensure consistency in customer flow (Dey-Chowdhury, 2021).
It is also vital to note that the expenditure in households rose when the lockdowns were lifted. This indicates that the main cause of challenges in business, employment, and other economic spheres was the presence of restrictions. Other indicators that have been reported by Dey-Chowdhury (2021) are that there was a rise in household savings because people were more conscious of their spending. These findings are consistent with Allas, Canal, and Hunt (2020) who argued that people save more if they perceive imminent risks in their finances. With reduced income levels, it was understandable that people would spend wisely and avoid unnecessary waste of finances because there were no clear timelines on when the lockdowns or businesses would return to normal.
In another study, Leslie and McCurdy (2020) assessed the economic effects of the pandemic in the United Kingdom by using economic indicators. In terms of economic activity, the United Kingdom experienced the most acute economic contraction in its history, indicating the income available and financial challenges experienced by individuals (Dey-Chowdhury, 2021). When the economic activities are low, people have limited opportunities to get income. Leslie and McCurdy (2020) noted that the decline was the most severe since 1997. The labor market is another sector that was affected negatively. There was a clear risk of jobs and employment in the United Kingdom because many sectors closed down completely. Merged with a decline in purchasing power, many employees were placed in a dangerous financial position (Leslie & McCurdy, 2020). Therefore, the pandemic greatly affected the income levels of the people as well as the availability of employment opportunities. It was also recorded that many people claimed credit cards, the highest of claimants recorded in recent years. Although there were incentives to cushion household income declines. There were reduced wages because businesses were coping with the new financial demands required to continue operations during the pandemic. Low customer flow affected other businesses, which was caused by the outbreak (Leslie & McCurdy, 2020). All these aspects have financial implications on workers, hence the need to understand them and develop effective solutions that will curb further damage to the economy and wellbeing of workers.
Methodology
Introduction
The study design utilized in this research was exploratory. The design was most appropriate because it sets a proper context to undertake further research in the future. Exploratory research is defined as an investigative approach where a research question or problem is answered using secondary data from existing literature (QuestionPro, no date). The design aims to have a clear or better understanding of the existing problem. In this particular study, the aim is to understand the financial challenges experienced by workers in the United Kingdon and their solutions.
Theoretical Framework
However, it is important to note that the design relies mo...