The current cost of living crisis in the UK has made financial wellbeing an issue that’s difficult for employers to ignore. But in-work poverty is not a new problem. In fact, it’s a problem that’s been growing since the mid-1990s, mainly because incomes (including from social security benefits) have not kept up with fast growing housing costs for lower-income, working households.

But other factors can lead to people falling on hard times too. Unexpected circumstances can leave workers financially vulnerable: the death of a family member, the break-up of a relationship, being made redundant, having work hours cut, or an influx of unexpected bills and expenses. For those with families, events like children’s birthdays, school holidays and Christmas, or paying for school trips and uniforms can be financially debilitating.

Work can and should be a reliable route out of poverty. But one in eight UK workers struggle to make ends meet. So, what does in-work poverty look like?

We’ve teamed up with JRF to create a series of seven fictional characters, based on JRF’s extensive insights into lived experiences of in-work poverty:

This is poverty.

The impact of poverty on a person’s wellbeing can be devastating, as this powerful short film from the Joseph Rowntree Foundation (JRF) illustrates:

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Video still: This is poverty

In-work poverty can affect people's lives in various challenging ways. When you’re living on a low income, it can be much harder to juggle work with other aspects of life. For some individuals, poverty may mean:

  • going without food, adequate clothing or heating – or having to choose one over another
  • relying on food banks or favours from friends and family
  • being unable to save for a rainy day or emergency and having no money for social or leisure activities
  • increased work absences or lateness, for example, due to:
    • having no money to travel to work
    • struggling to afford childcare
    • money worries contributing to poor mental health
    • poor nutrition leading to physical illness
  • feeling unable to take time off work when ill
  • facing stigma which can pull people down and hold them back – often preventing them from accessing the help they need and hindering their progress at work.
Living like this from day to day, with no hope on the horizon, is exhausting – and makes it almost impossible for people to improve their lives and fulfil their potential. For people in work, this can affect their performance and damage their physical and mental health, trapping them in a cycle from which it’s difficult to escape.

People living on low incomes often pay more than people on higher incomes for basic goods and services. This is known as the ‘poverty premium’, and can make poverty harder to escape.

For example, if you can’t afford to pay for things like home insurance up front, you may have to pay in monthly instalments, which cost more overall. Similarly, many low-income families do not have access to affordable finance and may rely on payday loans to make ends meet, which is more expensive than other mainstream credit alternatives. A study in 2019 found that people on low incomes were paying an extra £478 a year (the equivalent of 14 weeks’ of food shopping) for essentials like energy, credit and insurance.

Rising energy bills will also hit low-income households the hardest: a single adult household on a low income spends an average of 43% of their incomes after housing costs on energy bills, compared with 5% for middle-income families.

The JRF report, Attitudes of people on a low income: work, found that people living on low incomes are generally very positive about work, but want more from the labour market – they expect employers to pay a wage that covers the cost of living, provide training and the chance to progress, and offer flexibility to balance work and caring responsibilities.

But some employment practices make it difficult for some people to escape poverty. In some cases, work makes people worse off. For example, if someone’s shifts are cancelled at short notice, they’ll find themselves out of pocket if they’ve already made and paid for travel and childcare arrangements that can’t be rearranged at short notice.

Employers’ attitudes to managing absence and flexible working requests can also put an extra strain on those struggling to make ends meet. For example, if someone feels unable to take time off when ill because statutory sick pay would leave them out of pocket, or unable to flex their hours for a doctor’s appointment for fear of losing their next shift, their health can deteriorate and impact their performance at work – and, ultimately, their ability to earn a living in the long-run.

As Louise Woodruff, Policy and Partnerships Manager at the Joseph Rowntree Foundation, says:
‘Work – or the absence of work after a cancelled shift – shouldn’t leave people worse off or out of pocket.’

CIPD research shows that, although work in the UK overall has become more secure over the past decade, insecurity remains a real issue for many low-income households. 

Many employers and individuals across a range of industries do have an appetite for well-managed atypical working arrangements. Temporary and zero hours contracts play an important role in our economy - some people would be unable to make a living at all without flexible contracts and ad hoc hours that fit around their lives. But when they’re badly managed, the flexibility is often one-sided and the balance of power is tipped in favour of the employer.

Employers must ensure there’s genuine choice and mutually beneficial flexibility. In particular, workers should have some advance notice of when they'll be working, as well as protection from last-minute cancellation of shifts. 

What can employers do to help?

The most obvious role employers can play in tackling poverty is to provide a liveable income that helps prevent people from falling into hardship in the first place. Many employers are under pressure to raise wages as they face the twin pressures of helping workers deal with rising living costs and ongoing recruitment difficulties.Inflation-beating wage increases will not be realistic for all employers, but there’s much more employers can do to improve their employment offer and help make work a more reliable route out of poverty. We’re asking employers to implement a holistic financial wellbeing policy that sets out what they can and will do to raise living standards, through three key areas of HR practice:

Female silhouette

I was often phoned and asked to pick up extra clients or told I was not needed at some clients, and this would change my wage for that day, that week. […] I felt due to the nature of the work and the relationships built between employees and the clients we worked with, it was difficult to say no when we were asked to cover extras. It was either we did the extras or the clients went without care.



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