Ask an HR Expert
Q: We’re starting the process of annual compensation reviews, and it’s been a rough year for our business. How do we approach these conversations when levels of uncertainty are still so high?
A: Just because recession potential keeps making headlines and the future is unknown, the talent you currently have may be indispensable. There is no “right” answer; the key here is open communication and transparency.
And, we’ve been hearing from a lot of clients that they expect things to shift significantly early next year, after the election and interest rate decisions have been made.
Here are three strategies our HR Consulting Team has discussed with clients on how to approach the annual raise and bonus conversation in a down year without clear future trends:
1. Pay-for-Performance (and Retention)
For positions that remain in high demand or for exceptional employees, rewarding and retaining talent remains critical. If this sounds like your team, you should consider maintaining raises and bonuses on par with previous “normal” years.
If an employee isn’t feeling valued or connected, they’re not going to stay with a company long-term — bonuses and other rewards are major contributors to retention.
2. Smaller Profits, Smaller Targets
It sounds like your goals might have gotten a little off track this year, so you might consider splitting the difference and offering your best employees a one-time bonus versus a raise. Payroll only takes a hit for one month, which allows the company to be nimbler moving forward, while still rewarding employees for their dedication and adaptability during an uncertain time.
We’ve also consulted with clients who are giving partial cost-of-living adjustments (COLA) across the board to let employees know they’re still valued, and that the size of the increase will look different in the future.
Communicating that the employee’s strong performance and hard work resulted in this bonus, especially when every dollar is critical, is a necessary part of this strategy.
3. Delay Payday
Companies that are starting to see an uptick in business but want to stabilize resources for a few months or quarters are pushing out their bonus and raise cycle into 2025. This lets employees know they’re still valued and can expect a raise in the future, depending on the economy and the company’s performance.
While it’s not a strategy to use every year, it can be a stop-gap solution to a challenging one!
You’re balancing a lot when choosing how to handle raises and bonuses: employee appreciation and expectations, retention, budget limitations, and future predictions. The key to successfully navigating any compensation review this year is in how the decision is communicated to your employees.
Do you need more HR support? Boly:Welch HR Consulting can help your team go farther with budget-friendly human resources consulting, tailored for your success.
