The Freezing of Salaries

A salary freeze can hit anybody -- in 2010, President Obama froze the salaries of top White House officials. However, quite often a company institutes a salary freeze not only to save money, but also to prevent more disastrous consequences like eliminating jobs. A salary freeze does not necessarily mean you won't get a raise, and you can always look for other sources of income.

Identification

Salaries are thawing after the 2009 global recession. In 2011, for example, 4 percent of companies froze salaries, compared to 14 percent in 2010, according to the Society for Human Resource Management. A salary freeze is effectively a pay cut because inflation weakens the value of the dollar, so you cannot purchase the same amount of goods as you did last year. Although you might feel a salary freeze is unfair, companies often do this so they do not have to lay off valuable talent.

Considerations

A pay freeze does not necessarily affect all employees. You can still ask for a raise during a salary freeze, but you must have a good reason for the company to keep you. In general, this means you can point to objective results, especially sales, that the company cannot afford to lose. If your company is in severe dire straits and close to going bankrupt, you might not want to ask for a raise under any circumstances.

Legality

Instituting a pay freeze is illegal for employees who are guaranteed raises in their employment contract or stipulated by state law. For example, teachers often receive automatic raises every year in accordance with a state pay schedule. Even if you are entitled to a raise, you might want to voluntarily allow the company to cut your hours or freeze your pay to help it survive, and maybe receive a raise or bonus once the company starts turning things around.

Tip

If your company cannot offer a raise, talk to human resources about perks it can offer in lieu of money. For example, you might ask the company to let you work at home so you can reduce commuting costs. The very last option for you should be cutting contributions to your retirement plan, such as a 401k. Also, keep performing at a high level, because a work slowdown or frequent complaints to management can jeopardize your career.

References

• The Wall Street Journal: Salary Freezes: How to Cope
• Society for Human Resource Management: Global Salary Increase Budgets for 2010 and 2011
• ABC News: Companies Try Pay Freezes to Avoid Layoffs
• Forbes: How To Negotiate A Raise In Tough Times
• Inc.: Avoiding Layoffs
• ABC News: Quinn Defends State Worker Pay Freeze