//If folk are producing the same output for the same amount of pay, how would that increase inflation?//
Because they are now inactive for 20% of the working week. If they can do in four days what they used to take five to do, it hasn't driven up productivity at all. It simply demonstrates that their productivity previously was not what it should have been. It shows they were only operating at 80% capacity. What their managers should do now that they have discovered that fact is suggest that if they can now do what was previously five days' work in four days, their workload will be increased by 25% to occupy them for the fifth day of their employment.
Low productivity is a major cause of lack of growth and inflation in the UK. Rewarding staff who have been working below capacity by giving them a day off to bring them up to full speed is hardly a way to tackle the problem.