No Pay Increases this Year

By Margaret O'Hanlon

Post pandemic…no pay increases.  That will be the harsh reality that many of us are facing this year and most likely through 2021. 

It's going to be nothing like our usual numbers game. Instead, it is going to be emotional, significant and painful. Every employee is worried about finances right now. Combine that with the anxiety everyone is feeling because of the virus, and you've got a really tricky situation to handle.

Who's good at handling this situation? Not many. And there is no way to duck it, because we'll need rapport with our employees more than anything this year. Plus, we'll need to understand their feelings as well as their decision-making needs for what's coming.

"Feelings" because, as much as employees will understand the need to tighten the purse strings, they will also be eager to be recognized as valuable to your company, perhaps more than ever before. "Decision-making needs" because you'll need to inspire employees to realign what's valuable to them. You'll be asking them to choose to agree to replace both the cash and the self-confidence that comes with a pay increase with an alternative program that you've designed.

Plus, even though employees may understand the need to cut back on pay increases--in fact, they may even support it--they will still feel the loss and need a stand-in of some sort. You get it, don't you? Say you come home each day and reward yourself with a beer. Then you decide to give it up, because the doctor's got you on meds that don't work well with alcohol. You come home the next night, but this time there's no beer, there's no distraction, it's tough to relax. So to make the best of the situation you realize that you've got to replace the beer with something else (nonalcoholic).

It's going to be the same way with your employees. Some of you will be able to replace the raise with a bonus, so you'll have it easier. Others will not have the budget. What's your replacement going to be?

You'll want to find one that's personally satisfying to employees and has potential financial value, probably long term. Your trade-off program(s) should probably fall under categories like professional growth, career opportunities, work breaks, medium-term incentives and so on. At least these look toward the employee's future with your company, have projected financial value and show that you recognize the employee's contribution. In other words, they align somewhat with the features of pay raises and thus can be realistically considered as replacements.

To respect your employees, you WOULDN'T use programs that usually fit into spot recognition categories like parties, tickets, etc. These would not parallel an annual increase in any substantive way (e.g. mac and cheese instead of the beer). I wouldn't even consider the recently relevant "work-at-home awards" financing home-office needs as a substitute. The money makes it easier for employees to do their assigned work, but has no real significance as recognition or help with projected career opportunities.

Also notice that, because you will the asking employees to realign their opinions about what is valuable to them, your replacement program will need a change management foundation rather than a typical, linear communications approach. Modifying feelings and making decisions are both step-wise processes that must be involving and highly tailored to your employee audiences.  
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Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. A former Board member for the Bay Area Compensation Association (BACA), Margaret coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.
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