Many people will experience a salary freeze at some point in their working lives, especially in a complex, volatile and uncertain phase like today. So, what is it and what we should do as an employee?
What is salary freeze?
Salary freeze or wage freeze or pay freeze, according to Cambridge Dictionary, is a situation in which a company stops increasing employees’ pay because of financial difficulties. While Nasdaq, the oldest and one of the biggest stock markets in the world, defines it as “a temporary halt to increases in salary due to financial difficulties experienced by a company”.
So we can say that salary freeze is a condition when a company suspends salary rise for a period of time due to financial difficulties.
Why does salary freeze happen?
A salary freeze is a way for companies to save money when they are having financial difficulties or expect to have them in the future. It involves not giving employees raises, deferring bonuses or incentives and withholding recruitment.
To stabilize their business during difficult times, a company may consider implementing a salary freeze. A hiring freeze can also be implemented along with salary freeze, to reduce expenses further.
Reducing other expenses is also a way to cut cost, especially if the only alternatives are cuts in compensation or widespread layoffs.
This is a common practice during economic downturns as a way for companies to reduce expenses without having to let employees go.
A company also might implement the this freeze to address internal salary inequalities or imbalances. For example, if a company finds that some employees with similar job titles or responsibilities are being paid significantly more than others. Company may implement a salary freeze to address this issue. It will help to equalize salaries among those employees.
Is salary freeze legal?
In Singapore, it is generally legal for a company to implement a salary freeze. However, the terms and conditions, including its duration and the circumstances under which it may be lifted, the company must communicate it. It should not violate any provisions of the employment contract or any applicable laws. Companies should also be transparent with their employees about the reasons for the freeze. Communication and transparency can help to build trust and goodwill with employees and minimize potential conflicts or legal issues.
Under the Employment Act in Singapore, law forces companies to pay their employees at least the minimum salary as specified by the Ministry of Manpower. If a company implements a salary freeze, the employees’ salaries must not fall below the minimum salary. Additionally, if an employee has signed employment contract that specifies a salary increment or promotion at a certain time, the company can not unilaterally change these terms without the employee’s consent.
It is important to note that a company must not discriminate against an employee when implementing a salary freeze. This includes discrimination on the basis of the employee’s race, religion, gender, age, or other protected characteristics. If an employee believes that the company treat them unfairly. They may seek legal recourse.
What should we do?
Many companies are still recovering from the economic losses caused by the COVID-19 pandemic and yet they have to face the upcoming global recession. So, salary freeze was the best option to keep them survive.
As an employee, here few things you can do when you have to deal with it:
Understand the reason
It’s essential to clarify the reason why it happens, how long it will last, and who else is affected. Even if your company can’t answer all your questions, it can help you understand the situation before you decide what to do with your career.
Communicate with your boss
Communicate openly with your company about your concerns and ask for their perspective on the salary freeze. This can help you better understand the company’s situation and may lead to opportunities for discussion and negotiation.
Maintain your professional standards and not let the salary freeze affect your work ethic. This freeze might be not only affect you and your company leaders may also be affected. By consistently showing a positive attitude and excellent work ethic, you can demonstrate your value to your employer and show that you are committed to your job and the company.
Ask for compensation if possible
Negotiate other forms of compensation: If a salary increase is not possible, you may be able to negotiate other forms of compensation, such as additional vacation time or remote working options.
Seek out opportunities for professional development: You can still advance your career by seeking out opportunities for professional development, such as taking courses or earning additional certifications.
In summary, salary freeze is a common way for a company to save money during times of financial difficulty. There are might be many reasons for that. So, it is important for employees to understand the reasons for a salary freeze. Communication between employee and company is the best way to overcome it.
Solution for company
A good employee management and communication will help companies to overcome this time of complexity, volatility and uncertainty. Human Resource Management System from HRMLabs helps companies to manage and engage employees. HRMLabs helps company by streamlining HR processes and enhancing communication and collaboration.
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