Why You’re Not Getting a Salary Increase This Year
The Economic Realities Businesses Face
Times are tough; there’s no denying that. The economy has taken some serious hits – and businesses are feeling the squeeze. As a business owner myself, I get it. Keeping the ship afloat ain’t easy when costs are skyrocketing and revenue is stagnating.Tough decisions have to be made – and often, that means putting salary increases on hold. It’s not personal, it’s just business. Let me break it down for you:
Inflation is Through the Roof
We’re dealing with inflation rates not seen in decades. The cost of goods, services, you name it – it’s all going up. For businesses, that means higher operational costs across the board.From the rent or mortgage payment to utilities, supplies, shipping – the expenses just keep piling up. Giving out raises means digging deeper into already stretched budgets. It’s a tough pill to swallow, but fiscal responsibility has to come first sometimes.
-Supply Chain Nightmares
Thanks to supply chain disruptions, getting the materials and inventory needed to run a business is like playing a game of Chutes and Ladders. One minute you’re set, the next you’re set back to square one.These hiccups mean higher costs to get essential goods, not to mention delays that can bring production to a standstill. For businesses operating on tight margins, a salary increase could be the tipping point between staying afloat or going under.
The Talent Wars
I get it, top talent is hard to come by these days. With the labor shortage showing no signs of letting up, it’s a job seeker’s market out there. Businesses have to get creative to attract and retain good people.But salary increases aren’t always the answer – at least not across the board. More strategic approaches like skill-based pay adjustments, bonus incentives, or improving benefits packages could be better options when budgets are tight.
The Financial Realities for Employees
Now, I know what you’re thinking: “But Dave, my bills are piling up too! I need that raise just to keep my head above water.” Believe me, I hear you. The financial strain isn’t just hitting businesses – employees are feeling it too.
The Cost of Living Crisis
Rent/mortgage, groceries, gas, utilities – it all adds up quickly when prices are soaring. For many, a salary that was comfortable a year ago now has them stretched razor thin. Not getting that expected raise is a bitter pill.But here’s the thing: businesses have to survive too in order to keep paying salaries at all. Sometimes that means tightening belts in the short term to withstand the economic storms. It’s not ideal, but often necessary.
-The Retirement Savings Struggle
Stashing cash away for retirement is crucial – but it gets way harder when every dollar is already accounted for. Without salary increases to help incomes keep up with inflation, retirement contributions get the short end of the stick.It’s a long-term financial hit that can have big consequences down the road. But again, businesses have to make tough choices to protect their bottom line today. Delaying raises is often one of the only viable options.
The Emotional Toll
Money woes take a serious emotional toll – there’s no denying that. The stress of not getting a raise when you were expecting one can breed resentment, hurt morale, and even drive good employees out the door.As an owner, I get how demoralizing it can feel to have hard work go uncompensated. But a demoralized workforce is better than no workforce at all when a business’s survival is at stake. It’s an awful situation all around – but that’s the reality of tough economic times.
Strategies for Businesses to Retain Talent
Okay, so giving out raises may not be in the cards this year. But that doesn’t mean there’s nothing businesses can do to show employees they’re valued and keep them engaged. A little creativity can go a long way:
- Low/No-Cost Perks – Things like extra paid time off, flexible schedules, work-from-home options, professional development opportunities – all can help employees feel appreciated without breaking the bank.
- Performance Bonuses – If raising salaries across the board isn’t feasible, performance-based bonuses could work. Rewarding top performers helps retain star talent.
- Profit-Sharing – Getting employees invested (literally) in the company’s success can boost engagement and loyalty. Offering profit-sharing or stock options are two potential avenues.
- Transparency – Being upfront about the financial realities the business is facing, and why raises had to be put on pause, can help employees understand it’s not personal. Clear, honest communication is key.
- Get Creative with Benefits – Look for cost-effective ways to beef up benefits like subsidized meals, gym memberships, student loan assistance, etc. Small perks add up.
At the end of the day, a little empathy and creativity can go a long way in showing employees they’re valued – even when salary increases just aren’t possible.
The Legal Side of Holding Off on Raises
Now, as a lawyer, I’ve got to cover the legal side of putting salary increases on hold. There are some key considerations:
-Wage Laws and Contracts
First things first – make sure holding off on raises doesn’t violate any wage and hour laws or contractual obligations. Some jurisdictions have rules about how frequently raises must be given, for example.If employment contracts guarantee annual salary reviews or increases, those would need to be honored (or renegotiated). Ditto for any union agreements in place. The last thing any business needs is a costly lawsuit over withheld wages.
Discrimination Concerns
Anytime compensation decisions are made, there’s a risk of discrimination claims if certain protected groups are impacted disproportionately. Be very careful that factors like race, gender, age, disability status, etc. don’t play into who does and doesn’t get a raise.Thoroughly documenting the legitimate business reasons behind the decision can help guard against discrimination allegations. But it’s still a minefield to navigate cautiously.
Performance Documentation
Speaking of documentation, having clear performance records on file for all employees is crucial too. That provides an objective basis for determining who might still qualify for raises or bonuses based on exceptional work – rather than handing them out arbitrarily.Keeping scrupulous records on productivity metrics, feedback, disciplinary issues, etc. allows for fair, defensible decisions. It’s a hassle, but key for avoiding legal headaches down the road.
-Communication is Critical
Finally, how the decision to withhold raises is communicated matters a lot legally. Being upfront about the rationale and economic pressures is important. But be very careful about wording – phrases like “the company can’t afford raises” could open a door to claims of financial misrepresentation or improper disclosure.Stick to the facts, avoid inflammatory language, and make it clear the situation is temporary until conditions improve. Having an experienced employment lawyer review communications is wise too.At the end of the day, delaying salary increases is legally tricky. But being proactive about compliance can keep businesses out of hot water.
Coping Strategies for Employees
Alright, I know – getting that “no raise” news is a bitter pill to swallow, even if you understand the business rationale behind it. But don’t lose hope! There are steps you can take to ease the financial strain:
- Rework Your Budget – Time to go line-by-line and see where expenses can be trimmed. Cut out any non-essentials, negotiate bills where possible, and divert freed-up cash to needs like rent/mortgage, utilities, etc.
- Earn Extra Income – The gig economy is booming. Look into side hustles like rideshare driving, freelance work, renting out space, etc. to supplement your primary income.
- Reduce Debt – Funneling all available funds towards paying down debts can provide huge interest savings over time. At least minimize new debt accrual.
- Downsize – As painful as it is, downsizing housing, vehicles, etc. to lower your cost of living may be necessary if your salary isn’t keeping up.
- Seek Assistance – From food banks to utility assistance programs, aid is out there for those struggling financially. Swallow that pride and pursue all options.
- Have the Conversation – If your situation is truly untenable, schedule a meeting with your employer. But come prepared with a level-headed plan and reasonable “ask” – not an emotional vent session.
The bottom line: a stagnant salary is tough, but taking a proactive approach to cutting expenses and boosting income can provide some relief until conditions improve.
The Writing on the Wall – What Experts Predict
Of course, the million-dollar question is: how long will this salary increase drought last? Unfortunately, the economic forecasts aren’t too rosy in the near-term:
“With inflation still stubbornly high and the Fed committed to taming it through interest rate hikes, a recession appears increasingly likely in 2023 or 2024. Businesses will remain in cost-cutting mode, making widespread salary increases an unlikely priority.” – Kathy Jones, Chief Fixed Income Strategist at Schwab Center for Financial Research
Yikes. The general consensus among experts is that businesses will remain defensive with spending until inflationary pressures and economic headwinds subside. Salary budgets will be among the last areas to see meaningful increases.A recent survey by Willis Towers Watson found that the average raise budget for 2023 is just 4.1% – well below current inflation rates around 8%. And that’s for the employees lucky enough to get an increase at all.Economists at the University of Michigan are predicting a recession will hit by late 2023 or early 2024, further squeezing business spending power. They warn that “real wage growth is expected to remain negative” until economic conditions improve.So in other words, the salary increase drought may be just beginning for many workers. Hunkering down and adjusting finances accordingly could be a necessity for the foreseeable future.
The Light at the End of the Tunnel
I’ll be honest with you – the outlook ain’t pretty in the short term. Businesses and employees alike are being squeezed from all sides by economic forces largely outside their control. Delaying or withholding salary increases is often a painful necessity to protect the bottom line.But here’s the thing: economic cycles are inevitable. What goes up must come down, and what goes down eventually comes back up again. This stagnant salary situation won’t last forever.Once inflation gets under control, supply chains stabilize, and the threat of recession passes, businesses will be able to breathe easier. And you can bet your bottom dollar that retaining and rewarding top talent will become Job One again.Those salary increase budgets will start opening back up. Employees who toughed it out through the lean times will be first in line for overdue compensation adjustments. The financial strain will start to ease.So keep your chin up and stay the course through this rough patch. Make the tough choices and temporary sacrifices needed to get by. Because brighter days, with healthier paychecks, are on the horizon.It’s just a matter of weathering the storm together – businesses and employees united in persevering through adversity. Have a little faith, keep hustling, and emerge stronger than ever on the other side.
The Bottom Line
Look, I get it – not getting that salary increase you were counting on stings. When money is already tight, it can feel like a punch to the gut, both financially and emotionally. Trust me, I’ve been there myself.But here’s the harsh reality: businesses have to make tough choices to survive economic crises like the one we’re living through. Payroll is often the biggest expense – so delaying or withholding raises, while painful, is sometimes the only way to keep the lights on.It’s not personal, it’s just business. A demoralized workforce is better than no workforce at all when a company’s survival is at stake. Owners have to make the hard decisions to protect everyone’s long-term interests.That said, I’m not giving businesses a free pass here. There’s still an obligation to get creative with low/no-cost ways to show employees they’re valued. Things like bonus incentives, profit-sharing, better benefits – that’s the kind of out-of-the-box thinking needed.And open, transparent communication is absolutely crucial too. Employees are a lot more understanding when the financial realities are laid bare honestly. Avoiding tough conversations breeds resentment.At the end of the day, we’re all in this economic storm together – businesses and employees alike. A little empathy, grit, and perseverance from both sides is what’s needed to emerge stronger on the other side.So keep your head up, make the necessary short-term sacrifices, and know that salary increases will return when the clouds finally part.