Improving Employee Value Proposition | KPMG | NG

Improving Employee Value Proposition during a Pay Freeze

Improving Employee Value Proposition

When companies are faced with economic and financial challenges, the knee-jerk reaction is to deploy cost-cutting measures. With the increase in operating costs, the daunting challenge for HR (Human Resources) is to ensure that staff cost to income ratio remains at sustainable levels, while also keeping an engaged workforce. The options typically hover around rightsizing, pay-cuts, recruitment freeze and pay freeze.

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Improving Employee Value Proposition during a Pay Freeze

When companies are faced with economic and financial challenges, the knee-jerk reaction is to deploy cost-cutting measures. With the increase in operating costs, the daunting challenge for HR (Human Resources) is to ensure that staff cost to income ratio remains at sustainable levels, while also keeping an engaged workforce. The options typically hover around rightsizing, pay-cuts, recruitment freeze and pay freeze.

Pay freeze, commonly known as salary freeze or pay flattening refers to a company’s policy of maintaining current pay levels for some or all categories of employees for a period of time. A pay freeze can mean “business as usual” for companies that do not typically increase pay. Conversely, for organisations that are driven by annual and promotional increases, this can pose a major change management issue, impact employee engagement and overall business performance if not properly managed.

This article explores various reasons and forms of pay freezes, possible effects and options for enhancing employee value proposition, even in “drought”.
 

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