his first full day in Office President Obama signed Executive Orders to
implement some of the ideals he articulated during his campaign. Actions taken regarding detainees grabbed
headlines. Less well publicized was the implementation of a pay freeze for all
White House employees earning more than $100,000 a year. Obama said, “During this period of economic emergency families are
tightening their belts, and so should
As I have written before I am not a huge fan of pay freezes or hiring freezes. Trust is eroded when they are announced and
subsequent exceptions are made. As economic conditions deteriorate it may be
time to soften my stance. A pay freeze that is not absolute makes more sense.
In this case the President was specific in including only employees earning
more than $100,000 a year.
Companies large and small are announcing wage
freezes. Some garner headlines in national news, others only affect the 10
people in a local office. Before you announce the freeze sit down with a
knowledgeable team and identify the potential affects and possible exceptions.
You don’t have to issue a 15 page policy but a clear guideline of who will be
affected will answer questions. Some organizations announce wage freezes as
indefinite and others set a date when the policy will be reviewed.
It is unlikely that employees will be surprised
by an announcement of a pay freeze, unless your business is thriving, hiring
right and left and providing extensive perks. 2009 wage increase budgets are
already slim, for many employees a 2% raise does not do much for their take
home pay anyway. Even so the policy and announcement should be made with care.
A wage freeze as the only cost cutting action is
not advisable. It can be an effective part of an overall plan and should be
linked to a financial goal. The team that announces the wage freeze should not
go out for a lavish lunch after the meeting!