Can I get away with no pay rises for two years?

Dear Aunty B,

We have told staff this year there are no pay rises, and they could clearly see the case for that as we share all financials with them. They accepted it really well. 

I have started my budgets for next year, and it looks very lean. Can I get away with two years of no pay rises?  



Dear EDB,

No, you can’t. You know why? Because in year three, your staff will be so annoyed, that as things start to turn around, you will be forced to give them so much, you will look back and regret your actions.

That is if they are still there and have not been poached by your arch competitor.

We saw this after the 1990s recession. Entrepreneurs told me that the worst thing about the recovery was dealing with grumpy, burnt-out staff – and their families!

Lower staff numbers mean that existing staff did more tasks and worked harder. They stayed later at the office, saw less of their families, and then didn’t even bring home the financial rewards to keep the spouse happy. When the recovery came, they made large demands for equity, bonuses and money, in part for the sacrifices they had made.

Here is a much better strategy. No pay rises for year one. A small pay rise for year two – and make a big deal of it. After all, it will hurt a lot. Then in year three you have some goodwill on which to build.

Remember though. Do whatever it takes to keep your top team. Your competitors are watching.

Good luck,

Your Aunty B.

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