Prepping Employees For A Wage Freeze

Only 43% of U.S. companies expect to provide compensation increases in 2010.  In addition to the wage freeze, 37% of companies say they plan to cut benefits.

The Society of Human Resources Professional quotes a Careerbuilder survey that claims 65% of companies provided compensation increases during the deepest part of the recession and only 32% planned to cut benefits. That’s a 12% decrease in companies offering raises during 2010. And a 13% increase in companies cutting benefits.

On top of this bleak employee news is last week’s 2% increase for federal government employees. If you haven’t spoken yet spoken with your employees and been transparent about whether you plan to offer raises this year, you should make that topic a hot priority.  Mainstream media continues reporting about a jobless recovery, but media reports can’t shoulder your burden. If you’re not giving employees a pay increase during 2010, part of being a responsive employer is telling them now to reduce their anxiety and be fair.

You can be certain that anyone you might lose over this issue is going to walk if you plan on freezing compensation this year.  Whether they walk right now or when you tell them in a few weeks or months is akin to choosing what poison you plan to breathe.

Cynics will note that the true jobless rate is over 17% while reported unemployment is 10%.   That means many employees likely won’t leave over compensation issues.  Your stars won’t leave if you’ve created a great environment.  And if you have staff who aren’t stars that leave, this is an employer’s market so wish them well and hire a star because you surely don’t buy into that nonsense about having a mix of star and average employees on your team.

As a small business owner, you need to be blunt, but kind.   You’ll need talking points about when you anticipate restoring compensation increases.  Your accountant and attorney should be involved at least in reviewing your talking points.  If your organization is big enough to have a HR professional, put that person on the case today with a draft due to you by Wednesday so you can make the announcement Friday.

Your takeaway as a small business leader is that staying quiet about compensation is an unacceptable form of avoidance for any organization, much less a small business in the midst of a horrible economic downturn.

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