A Human Response to an Economic Shock
Like many leaders, I started 2026 with a sense of optimism here in New Zealand. Economists were telling us we were finally turning a corner. Then the economic shock following the Middle East war created fresh uncertainty and put our confidence back on shaky ground.
Obviously, the impact on us here in Aotearoa is nothing compared to the reality of war in the Middle East. I want to acknowledge that upfront. What I want to talk about, though, is how we as leaders can respond to fresh inflationary pressures coming off the back of a very low economic base.
Our teams are feeling it, and we have a real opportunity to respond in a way that offers genuine support and relief. The key is to avoid one-size-fits-all responses and instead offer meaningful, tailored support that fits the circumstances across different segments of our workforce.
Money matters: inflation hits differently
Inflation isn't uniform across the board, despite the way it gets reported as though it is one single rate. At the moment, according to Jarrod Kerr, Chief Economist at Kiwibank, lower-paid households are experiencing it at 4.5%, compared to 0.9% for higher-income ones. That is a stark differential, hidden by the headline rate of 3.1%.
For those in our workforce in lower-paid roles, essentials like petrol and food take up a larger share of the budget. The very costs that are rising quickly in this crisis. A broad-brush response, while well-intended, won't reach the people who need it most. Let's design a response with this uneven reality in mind so we deliver real relief and sincere support.
For your pay rises this year, consider breaking them down into two six-monthly rounds. This gives you more choices about how to best use whatever is in the budget as circumstances unfold. Giving more of a lift to lower-paid roles is important, given how inflation is steepest here. If business uncertainty means you can't afford to bake in permanently higher salaries right now, consider one-off payments rather than ongoing salary increases.
What about non-monetary support?
Commuting costs for those who have to drive to work will be hitting hard and are likely to continue for a while.
For desk-based teams: offer flexible choices
If your office teams are already hybrid, consider giving more flexibility to work from home to cut out an additional one or two commuting costs. It's a practical way to ease petrol expenses without big structural changes.
At the same time, we know home setups vary. Some thrive remotely while others prefer the office for focus or connection. Prioritise choice, and build in supports like regular team touchpoints to maintain those important relationships. (Tools like my free Flexpert conversation guide can help teams find what works best.)
For site-based teams: practical adjustments that work
The site-based workforce clearly can't benefit from working from home. If only desk-based colleagues are offered commuting relief, it can quickly create a sense of inequity, which erodes a cohesive organisational culture. Site-based workers accounts for two-thirds of our workforce, so we need viable options here too.
Look at flexible options such as compressed hours over a four-day week or nine-day fortnight to give some meaningful commuting relief. This reduces commutes and associated costs, while keeping pay steady. It also gives people breathing room for rest or family, and when introduced thoughtfully, it can benefit the business with higher rates of retention.
Ready to go further? Explore a shorter work week
If you want to use this as an opportunity to drive productivity while also reducing the number of days people commute, consider setting up a four-day week or shorter work fortnight pilot.
In exchange for a 'gifted' day off weekly or fortnightly, teams focus on more efficient ways of working to drive productivity. It also keeps pay steady, but aligns incentives of business productivity with your workforce, leveraging the initiative of everyone to maximise their contribution. I'm seeing this in current pilots: stronger collaboration, reduced burnout, and a real sense of business value.
What can you do right now?
Here's a simple way forward:
Understand your various workforce segments: Focus first on lowest-paid and highest-impact areas.
Tailor flexibility: Match options to work styles and personal needs.
Communicate with empathy: Share the reasoning openly with your workforce and stay nimble as things evolve.
By segmenting thoughtfully and acting promptly, we can ease pressure, create trust and navigate this uncertainty together.
If you want to talk through how this might work in your organisation, drop me a message and get in touch. I'm keen to hear how other leaders are approaching this moment.