As the year enters its final two months, many workers at small businesses are wondering if they’ll be getting a raise next year. And some company owners have bad news to deliver: The answer is no.
One of the most uncomfortable situations an owner must deal with is telling employees that business isn’t good enough to give the staff raises. Breaking the news is hard enough; then an owner has to deal with workers’ ongoing unhappiness and his or her own fears that an exodus of talent might follow.
Human resources professionals advise owners to be open about the situation and to be sure workers know that everyone, including the boss, is sharing the pain.
“If it’s not in the budget to offer raises, be up front, be clear, be honest, explain the reasons,” said Rob Wilson, president of Employco, a Chicago-based human resources firm. “Is it health care costs, pensions, the economy, interest rates, the competition?
“They won’t be happy, but they’ll respect that,” Wilson said.
Conversely, “the less they know, the more suspicious they’re going to be,” said Leigh Branham, a human resources consultant in Overland Park, Kan. “If it’s opened up, they’ll say, ‘Now I understand.’”
Being open about what’s going on serves another purpose. It lets employees know that how well the company does – and, in turn, whether they’ll eventually get that raise – can depend on how well they do their jobs.
Richard Chaifetz, chairman and CEO of ComPsych Corp., a Chicago-based employee assistance firm, suggests that as owners deliver the news about raises, they also set up performance goals for all the employees – “and only differentially reward those people who reach those goals.”
“You’re helping employees see the intricacies of performance and how they’re tied to the performance of the organization,” Chaifetz said.
It might be tempting to just tell employees that you’ll give them raises as soon as you can. But don’t do it; that can be problematic and come back to haunt you. Employees can hear such reassurances as a promise, and then, if business is still bad and you can’t live up to it, there are going to be even more hard feelings, Branham said.
Branham said the way to soothe employees – and hopefully keep them from leaving – is to discuss with each worker how, in lieu of money, you can help them feel more satisfied with their jobs. Flex time or a change in responsibilities might actually be more valuable than a raise to some of your workers. Another way: Even if you can’t afford to fund a 401(k) plan, set one up so employees can get some tax-deferred savings (and plan to match their savings as soon as you can).
And, if you’re concerned about some of your staff quitting, let them know you want to keep them. Branham, author of “The 7 Hidden Reasons Employees Leave,” suggests telling them, “We know you can go someplace else and make more money, but we want you to think twice about it.”
What happens in the following weeks and months is as important as the initial conversation about raises and the state of the business. Your employees need to see from what you say and do that they’re not the only ones making the sacrifice; they will be eagle-eyed for any signs that they’re bearing the burden on their own.
For example, Wilson said, “if you show up with a new car and say, ‘I’m sorry, I can’t afford to give you a raise,’ you’re going to have an unhappy work force.” If you absolutely have to get a new vehicle, make sure it’s well below the top of the line.
And with the holidays coming, “don’t have a flashy party,” Branham said. Your employees would rather have the money that goes into a big affair at a restaurant. Don’t give them little trinkets as holiday presents, either.
You might also help the situation by letting your employees know exactly what you spend on them. For example, Wilson said, let them know how much is spent on health insurance and other benefits, and also let them know how much they pay in employment taxes. This is information that can be included on each pay stub.
If an employee earns $15 an hour, with that kind of information they can see “it’s not really $15, it’s really $20 or $22,” Wilson said.
Joyce Rosenberg writes about small business for the Associated Press.
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