How to manage a pay freeze and maintain morale

Having just come to the end, we hope, of the big freeze on the weather front a recent survey has suggested that HR professionals may have to consider a freeze of a very different but, if anything, less pleasant kind concerning pay. A recent study published by the Labour Research Department (LRD) states that a larger proportion of its database of 2,000 companies than ever before were either implementing a wage freeze or seriously considering one.

Whilst a firm control of the labour bill should always be high on the HR agenda a wage freeze is something that is always viewed with trepidation and with good reason even in the spirit of realism encouraged by these economic times. In my experience however and surprising though it may seem, if you plan and carry out a wage freeze whilst paying attention to some simple rules you stand a good chance of not only making a major contribution to controlling costs but you also may even earn the thanks of the wider workforce for the way you carry it out. A feeling that ‘everyone is in this thing together’ may even restore the morale of your hard pressed employees. Here is my 3 point plan for successfully handling this difficult subject:

1. Communication

Never is clear and straightforward communication with staff more important than when the issue concerns pay and benefits. Everyone should be well aware of the financial situation in your Company on a monthly or (at least) quarterly basis. If things aren’t going well then your staff should be told, otherwise any news of a pay freeze will be met with a mixture of incomprehension and hostility. Staff that are regularly briefed about market conditions and future prospects still won’t like having their pay pegged back but will at least give you credit for keeping them in the loop. They may even have some alternative suggestions of their own to add to the debate (see below).

2. Look at the Whole

However much staff may understand the need for a pay freeze they will resent any indication that others in the business are somehow getting around it by landing benefits or perks not available to them. That is why you must ensure that the credibility of your actions is not undermined by a Director taking delivery of a new Company car or news of the sales department treating favoured clients to corporate hospitality at Twickenham or Wembley. Even the redecoration of the Board room at a time like this can set off a chorus of ‘them ‘n’ us’ grumbles so you must have your antennae more highly tuned than usual to avoid these sort of gaffes. Everyone must be persuaded that the overall health of the Company depends on putting aside personal wish lists however valid they may seem to the individual. More than ever it will be up to you to ensure that the business thinks and acts as one unit.

3. Find Opportunities

Good HR people can find positives in the most unpromising situations and this is no exception. If you have an ideas scheme then, during this period, make sure it is focused on targeting rewards directly at cost saving ideas. Why not use your staff forum to consider areas of cost savings throughout the business or even set up a cross departmental group to specifically consider what regular day to day savings in energy usage, materials and consumables could be made. Remember, staff at the chalk face often see opportunities for improvements and savings far more clearly than you. You could even consider adopting the ISO 14001: 2004 Environmental Management System as a Company objective as it addresses many energy saving issues that will save money and promote the ‘Green’ agenda.


If you are able to handle your pay freeze with these factors in mind you will be in a good position to turn what would otherwise be a beleaguered and downbeat atmosphere into something more positive and forward looking. Good luck.