08/ 16/ 2005
by Tamara E. Holmes
It’s not uncommon for small-business owners to experience a cash crunch now and then, forcing them to eliminate extra spending, including money set aside for employee pay raises. If you find yourself in this predicament, here are some ways to break the news to your staff and reward them in a way that will lessen the blow and keep them from jumping ship.
Be honest
One of the most important things you should do in such circumstances is be honest with your most valued employees. The last thing you want is for them to believe they’re not getting a raise because you don’t appreciate their work. If you let them know that the spending cap is only a temporary solution, they’ll be more likely to give you some slack.
Set an example
Let your employees know that you won’t be seeing a pay raise either. If you can take a pay cut to benefit the business, tell your employees that, too. You want them to know that everyone is sacrificing for the good of the company. If they believe you’re benefiting at their expense, they’ll resent you and possibly look for work elsewhere.
Delay raises
Sometimes, you can predict when a cash-flow crisis will end. If so, delay pay raises for a certain amount of time, such as six months. By letting employees know they will receive their raise eventually, they’ll be more likely to cut you some slack. When delaying raises, also make sure employees understand that the new date for reviewing employee performance and offering annual raises will be a year after the date you set, not the initial date.
Offer time off
If you can’t offer employees more money, you can possibly offer them more paid time off. Figure out ways to get the work done by using interns or divvying up the workload. If you’re taking something away from employees that they expect to get, you must be prepared to give them something in return.
Promote work/life balance
For many people, the amount of money they take home is not the most important factor in their decision to remain at a job. Many employees view balance between their personal and professional lives as more crucial. In this case, the ability to spend more time with family can be a greater selling point for your company than more money. Perks, such as the ability to work from home occasionally or a flexible schedule, may keep employees smiling, despite lack of pay increases.
Sweeten benefits
The true cost of an employee’s compensation package is measured by adding the salary to the benefits package. You might find that it costs you less to offer additional benefits than it does to increase your employees’ salaries. If you offer to match retirement savings or add new benefits, such as a health club membership, make sure employees understand that they are getting something new and better than they had before.
