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Dear Workforce How Do I Tell Workers They Aren’t Eligible for Pay Raises

We have very loyal employees who perform well in their positions and who soon will reach a point of being overpaid for the work they do. How do I tell these people they soon won’t be eligible for salary increases?
September 23, 2005
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Related Topics: Compensation Design and Communication, Dear Workforce, Compensation
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Dear Bumpy:

Your organization's ability to compete hinges in large part on neither underpaying nor overpaying your people. This is an opportunity for you to reinforce this point to your workforce.
Given your brief tenure, it would be time well spent to learn about the pay history of these particular individuals. Also, find out how similar situations were handled in the past. You are not necessarily bound to abide by existing precedents, but you certainly want to be aware of them.
Telling loyal, productive employees they aren't eligible for raises is a far cry from telling them they are overpaid and shouldn't expect future increases. Share with them any objective market data used in making your decision. Be prepared to explain the means and frequency for reviewing the situation going forward.
Also, consider any mechanisms your organization uses to give these hard workers incentives to remain with your company. (Remember the adage that it costs more to rehire than retain.)
Examine ways to reward them that don't add to the fixed payroll obligation: bonuses (based on acquired skills, quality, teaching others),paid time off or specialrecognition awards. Make certain any such rewards recognize meritorious performance and aren't just window dressing.
Whatever you do, make it your paramount objective to ensure that these folks come away from the discussion with their managers--that's who should be delivering the message--as focused and engaged as ever. Good luck.
LEARN MORE: Bill Catlette, co-author,Contented Cows Give Better Milk, www.ContentedCows.com, Nov. 22, 2004.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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