Although we’d love to give our employees a pay rise to reward them for all their hard work and dedication, sometimes it’s not possible. Telling an employee that they won’t be receiving a pay rise can be a tough conversation to have. Taking the time to prepare for this conversation can ensure that the employee still feels valued and respected. Not preparing for this conversation can be detrimental to the workplace relationship and may result in the employee disengaging and potentially leaving the business.
What are some reasons why an employee may not receive a salary increase?
There are a number of reasons why an employee may not receive a salary increase such as:
- The business isn’t turning a profit
- There are employee performance concerns
- The employee’s salary is well above current market rates
- There are concerns about the business’ future profitability
- External factors i.e. COVID-19
Each of the reasons listed above may influence a business’s decision to withhold employee salary increases.
Depending on the reasons for the business foregoing salary increases, an employer will need to tailor their conversation with the employee accordingly.
How to tell an employee who is performing well that the business can’t provide a salary increase?
An employee who has done a good job may expect a salary increase to follow. Having a discussion with them and explaining that they will not be receiving a pay increase requires tact and a bit of empathy.
To start the conversation, the employer should soften the impact of a zero salary increase by expressing gratitude for a job well done. To ensure that the employees’ self-confidence and esteem remains intact, the employer should talk about specific areas that the employee has excelled and the different talents the employee brings to the overall team.
The next step is to deliver the news. The employer should explain the specific reason for the employee not being provided with a salary increase. Whether this is due to inflated salaries, economic conditions, or business factors, the reason should be explained.
If the reason is a result of economic conditions, the employer may wish to discuss with the employee that their continued high performance and commitment is essential throughout these lean times. If the reason is due to the employee having a higher-than-average salary, this factor can also be delicately discussed with the employee.
Whilst having this conversation with the employee, an employer should remain open-minded and receptive to any feedback provided by the employee. This may be a good opportunity to discuss potential career development opportunities.
Creative ways to recognise employees that don’t involve a pay rise
There are other ways an employer can recognise that an employee has done a good job that don’t involve a salary increase. These may include:
- Providing an extra day of annual leave
- Offering flexible working arrangements
- Working from home options
- Discounted gym memberships
- Movie tickets
- Team lunches
Each of these benefits can help boost morale within the workplace and work towards employees feeling valued in the workplace.
Can employee benefits replace salary reviews?
At some point, avoiding providing salary increases to employees will have a detrimental effect on retention. Employees will start looking outside of the workplace and consider other options. Recruitment and training a new employee are a lengthy and costly process and sometimes, employers may need to weigh up the pros and cons of offering salary increases to determine the best course of action.
What if providing no salary increase is due to employee performance issues?
It isn’t uncommon for employers to withhold salary increases from under performing employees. If this is the case, employers should diligently follow a performance management process prior to discussing with the employee that they will not be receiving a salary increase. Having good performance management processes in place should assist an employer in having this conversation with their employee.
Check out our previous blogs, Approaching Salary Increases and Benchmarking, How to prepare for Staff Performance Reviews, and Why Communication is Important in Managing Poor Performance for some more information about managing employee performance.
If you need assistance in having conversations with your employees about salary increases, get in touch with our team via the chat box here or give us a call on 08 6150 0043.
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