Keeping employees happy when pay rises aren’t an option

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Labour Cost Index statistics were released last week and showed that wages have increased by just 1.7% in the past year.

The Council of Trade Unions (CTU) has been pushing for employers to increase wages, claiming that many workers will be expecting a pay rise this year.

But what if an employer simply cannot afford to offer pay rises?

“Honesty is definitely the best policy if employers cannot afford to offer pay rises,” said Phil O’Reilly, chief executive of Business NZ. “Not just in the sense of just telling your staff, but also in explaining why. This isn’t only true of pay increases – you need to bring your people with you and the company by keeping them in touch with enterprise performance.”

He explained that keeping the workforce informed of the company’s performance is important because if the first time they ever hear about bad performance is when the business can’t afford to give them a pay increase they might respond cynically.

“When bad things happen nobody’s surprised and when they do you’ve got some good will,” O’Reilly told HRM. “Even if pay market hasn’t moved tell them,” he advised. “The more you’ve done about giving your employees context around the situation, the more likely you are to be met with acceptance. If it is because the company isn’t going well, then perhaps talk to the staff and engage them by asking for ideas for business growth.”

“People turn up to work for all sorts of reasons that have nothing to do with pay,” O’Reilly said. “Be cautious in thinking that people only turn up to work for the monetary reward.”

O’Reilly had the following tips for employers who are financially unable to offer pay rises:
  • Offer employees an education opportunity, which is perhaps cheaper than a pay rise
  • Offer more flexible work
  • Give teams a different set of responsibilities that might help them in future roles
  • Introduce new ways of connecting families to the workplace
  • Give staff additional leave from work for that particular year
  • Bring in interesting speakers to work who might help them progress
“These are the sorts of things employers should be looking to do anyway,” said O’Reilly. “If the only reason you are doing them is that you can’t afford to give staff pay increases one year people will see through it. Be a great boss anyway and they will likely say that it’s ok – don’t make it a reaction.”

He added that employers cannot use these rewards to continuously replace pay rises.

“It can work temporarily to use the other things people turn up to work for and drive impact through them,” he said. “But at the end of the day, if you’re not adapting to the market, people will eventually leave.”

“The New Zealand economy is growing but real wages have not grown nearly as fast as they should have,” said CTU Secretary Sam Huggard. “We are also seeing mixed messages from the government, who on one hand are modelling for wage increases of over 3% for coming years, but in the same breath are attempting to talk down expectations among public sector workers, who have already waited too long for a decent rise.”
 

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