Pay Freeze and Reviews

dmarchesi

My company is putting a hiring freeze on all new positions and a freeze on all pay increases effective immediately. After some discussion I felt that it would not be right to do annual reviews with the employees and then telling them that we are not giving any raises until Jan 1, 2009, if then. Even if we announce the freeze before the employees do their self-reviews, I still feel we will have a lot of upset employees.  Mainly due to the fact that since the history of the company (14 yrs) we have always given raises with reviews.  I know reviews are to be based on job performances and should not be tied to raises, but so many employees do associate the two together.   

Would love to here your thoughts on this matter!

 

Jake2

Presumably, your organization has to have a pay and hiring freeze out of financial necessity. If this is the case, hopefully this is not a secret, and employees are aware of the financial situation of the company. If so, the employees may be disappointed, but probably not surprised (assuming that they have an accurate idea of how business is going). Given the alternative of a pay freeze vs. a layoff, most employees would choose the pay freeze. It is natural that some employees may choose to leave, so you may want to identify critical players and counsel them individually as to the status of the organization and what is being done to ensure that the organization and their job will remain stable. Hopefully you can do this. Good luck!

dmarchesi

Thank you for your feedback.  I guess my main concern is how the employees will react to doing performance reviews with no raise in site for 1 year.  As I had mentioned our company has always given raises (as much as 10%) after a review.  Now they won't be getting anything until 2009 and this will not be retro back to their last review.  What would be your feelings if this was you - a review, no increase?

Jake2

I would definitely still do reviews (self and employer created) -- I think it is critical to still give performance feedback, regardless of the $$. If it were me, and I knew that the organization could not financially manage raises and stay afloat, I still would like to know how I am doing. If you have employees who are willing to stay, I think they should receive the feedback on their performance, regardless of raises. Hope this helps . . .

dhall111

Reviews are vital to the employee-employer relationship.  It lets employees know where they stand, what they are doing well, what they need to work on.  I've found them invaluable when proceeding with a termination (when reviews are done appropriately).  And I've also found them helpful when a disciplinary action is needed. 

 As long as you communicate the reason for the raise freeze you should be ok.  You're right, employees won't be happy.  Approach it from a "we're all in this together" view. I know that many employees only care about what they see in their paychecks, but you can spin this so that it lessens the negativity.  "By freezing raises we will contribute to the bottom line which will ensure we have jobs next year, can afford to pay for benefits, . . . etc."

cabrera

I agree that regardless of what the financial thermometer of the company is, the employees need to know how well they are performing their jobs.  Sometimes a pat or an accepting nod means a lot even during dire times.  Knowing that I am doing what is expected of me, if not more, and knowing that my contribution is helping the company meet the next hurdle is, in themselves, gratifying, expecially if they are recorded in my personnel files.  MAC

srallen

This would be an excellent time to set a new tone or practice with your reviews.  We have always stressed that a performance review does NOT necessarily mean a pay increase.  A performance review is simply that - a review of performance.  This is a way to let the employee know how they are doing and what they need to work on.  If you don't proceed, it would set a bad precedent.  Make sure that the employees understand the financial position of the company and that raises are not in the budget for this year - and why.  If communicated well, the performance reviews should go well.  You might want to do additional training with your supervisors to prepare them for handling the reviews under these circumstances.  Good luck!