Compensating Employees When Pay Raises Aren’t an Option
Merit raises and bonuses are common perks of American work life. Wage increases usually amount to around 3% of annual salaries, and while they are not legal requirements, the majority of employers include salary boosts in their budget every year.
Merit raises can have long-lasting benefits, most notably as a way to account for the cost of living inflations and to show appreciation for performance. In addition, merit raises can also facilitate a higher rate of employee retention. After all, in today’s tight labor market where national unemployment sits at just 3.5%, finding talent can be difficult. This reality makes the cost of merit raises dramatically less than the cost of employee turnover.
If wage increases are not an option, what can an organization offer instead? Here are a few tips and ideas for compensating employees in lieu of a pay increase.
Share the News in Advance
For employees who are accustomed to annual raises, discerning that a pay bump is not forthcoming can have an impact on morale. Employers should communicate the change with honesty and transparency, and as soon as possible, to help employees plan accordingly. Company and team leaders will want to explain why there will not be pay increases to help eliminate speculation and rumors.
Ask Employees for Feedback
Once you’ve shared the news that there’s a freeze on pay increases, you can shift the conversation by asking employees what they would value in lieu of a pay increase. Not only does the communication demonstrate the company’s interest in employee needs and well-being, but it will also help managers craft noncash rewards that matter.
Recognize employees with a desired noncash reward. Company leaders can acknowledge individuals with “employee of the month” awards or establish other company-specific awards that spotlight the specifics of a role, task or project. The key to making these awards special lies in the exclusivity, acknowledgment and how it’s presented. Ensure the award is something employees wouldn’t otherwise receive, like a coveted parking space.
Promote a live-work-play balance by giving employees extra paid time off. This could be an early release on Fridays or empowering employees to pick a certain number of hours or a day off that works for their schedule.
Who doesn’t like to see their name in print? Name an area or specific room in the office after an employee or group who has gone above and beyond. Employers may consider a handwritten thank-you note from the executive and management teams or a formal letter of appreciation that becomes a permanent part of their file.
Host a Party
Throw an inexpensive luncheon for employees and make the event fun with activities, good food and a little décor to make it extra special. A party is also an ideal time to recognize individuals in front of the entire company for a job well done.
While there’s a direct link between merit raises and job satisfaction, it’s important to remember that employees are the most engaged at work when they feel heard and appreciated. By taking the time and effort to show employees how valuable their contributions are to the organization, employers have a buffer against turnover – and the headaches associated with new talent acquisition.