Communicating No Salary Increases to Staff
It’s one of the more difficult and unpleasant conversations you have with staff. When and how do you communicate the news?
The “when” is easy: Don’t wait until December 1st to tell staff. Keep staff informed earlier, perhaps as early as mid-summer (assuming you are on a calendar year and typically award increases at the end of each year). Nobody likes bad news dropped on them at the last minute, especially when it has to do with their paycheck. And, if there are other benefit cutbacks likely, tell them sooner rather than later.
Now, the “how” part:
1. Tell everyone at a staff meeting so everyone hears the exact same message at the same time. Be compassionate in your delivery. Acknowledge that you are sharing in the pain. No one is exempt.
2. Give yourself some “wiggle” room. You may decide to phrase the news in terms of “it is very likely that…” or “although circumstances may change, my sense is that…” It is always better to under-promise and over-deliver. Especially when it comes to salary.
3. If possible, mention other perks that will be explored as compensation. Things such as extra vacation time, free lunches, or other perks can go a long way in sustaining morale.
4. Invite staff to meet with you one-on-one after the meeting should they have further questions or want to voice individual concerns. An open door policy is critical to maintaining your role as leader.
5. End on a supportive note. Acknowledge the hard work everyone is doing. And remind folks that the economy will improve.
If there is any way to squeeze merit bonuses out of your budget in lieu of salary adjustments, make this happen. Rewarding folks based on their accomplishments, and not waiting to the end of the year to do it, helps soften the bad news, and further reinforces staff’s commitment to excellence.
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Comments
Good advice, Larry. I had to do that once and there was no fall-out. The staff knew I was assertive about the issue, so when I reported the Board directing me to draft a budget with no staff increases, they realized it was a done deal.
I budgeted increases the next year, with no layoffs, so the sting wasn't as bad as it might have been.
Posted by: David M. Patt, | July 30, 2009 5:17 PM
Larry:
I agree with David. This appears to be very sound advice. Thanks!
--aaron
Posted by: Aaron Wolowiec | July 30, 2009 7:57 PM
I think another part of this that's very important is making sure to provide performance reviews even if there is no budget for salary increases. During times when money is tight I think it's more important than ever to make sure employees feel that the work they do is acknowledged and appreciated. I know of associations that just skipped performance reviews when there was no budget for increases and it always struck me as the entirely wrong way to go about it.
Posted by: Maggie McGary | August 4, 2009 1:12 PM
Maggie, absolutely agree with you on the need for performance reviews, regardless of whether there are salary increases or not. There are purists out there who say that performance appraisals should not be tied to salary increases; we've separated the two processes in the past but have recently reverted to delivering the news at the end of the appraisal meeting.
Posted by: Larry Sloan | August 10, 2009 2:47 PM
This is a very good and insightful article. Yes, we all know that delivering any type of negative news, especially salary can bring down morale. However, if you engage your staff in a discussion of ways to reduce expenses for the organization this may make your staff feel part of the decision making process. Also, I would recommend that you have a staff meeting to bring to their attention what constitute the overall budget and highlight your largest expenses i.e. salary and benefits including employer paid 401(k) plan, training,etc. This is real and will shed light why your organization may can not afford to give raises for the year. Particularly, if you are trying not to layoff staff.
Posted by: Katherine Simmons | September 8, 2009 5:16 PM
Very good article on a very dirty job.
All the more reason to set a very low base salary and allow quarterly performance bonus to make up 25% or more of annual pay. Employees learn that when time are good, so is the money. They also are more aware of waste and can come up with great cost saving ideas when their bonus is on the line in lean times.
Posted by: Vernon Schmidt | September 8, 2009 6:31 PM