Incentives are Key During Salary Freezes

By Randall Orser | Budget

As companies are struggling to survive under the grip of Covid-19 employee salaries have been mostly frozen and instead of pay increases different ways have to be found to keep employees motivated.   Companies are currently conservative with their profit projections and approach to changes hence the salary freezes.  In 2020 more than 36% of Canadian organizations froze salaries in 2020 compared to the pre-covid forecast of only 2%.  This trend will probably continue into 2021 as 46% of employers expect to freeze salaries in 2021.

As most companies are conserving cash and not increasing wages here are three ways that they can mitigate repercussions on business performance and employee engagement.

1.  Offer Incentives such as flexible work hours, extra vacation days, training opportunities and employee assistance programs.  This will deter talent from seeing new opportunities and encourage loyalty and promote the notion of teamwork and that the company will succeed if everyone works together to move the company forward.

2.  Communicate clearly with employees so that they are clear about the reason for the salary freeze, how long it will be in place and how it will affect their workforce.  Communications with employees should be on a regular basis especially with employees who are working remotely.  This helps employees to feel less isolated and increases transparency so that they know what is happening with the company so that there are no surprises.  

3.  Companies that do not keep up with salary increases run the risk of losing their talent to the competition.  Businesses able to increase salaries are going to try and attract the best talent and that will impact organizations that have to freeze or roll back salaries.   Pandemic support such as the Canada Emergency Wage Subsidy have enabled companies to furlough or give a temporary leave of absence that will keep employees in their jobs.  They can return to work instead of being laid off ensuring that talent is not lost and the employee will have a job despite the bleak labour market.

According to a survey by Morneau Shepell 76% of employers have reported that covid-19 has negatively affected their bottom line and in 2021 salary increases are going to be dependant upon how quickly these businesses can recover.

From an article by Sophie Nicholls Jones 


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