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How would you react if you received an unexpected piece of news from your boss informing you that your salary has been frozen? It will surely ruin your financial budget as much it does your day.

For employees, having your salary or your bonus payouts frozen is one of the worst feelings in the world. It feels like all your hard work has been for naught and your motivation to work takes a nosedive. That end of the year holiday trip which you have been planning for months will now have to be shelved and your online shopping wishlist would also probably have to wait. 

As reported in the Randstad 2H 2021 Workmonitor Survey, compensation and benefits ranked as the most important career consideration for employees across Asia Pacific. Cutting down on financial benefits will undoubtedly create dissatisfaction as it can make employees feel underappreciated for their hours of hard work.

Although it certainly feels like it, having your salary frozen is not the end of the world. This article will explain what a wage freeze entails and what you should do if it ever happens to you.

what is salary freeze
what is salary freeze

what is a salary freeze?

So, what is a salary freeze? A salary freeze, also known as wage freeze, happens when an organisation temporarily suspends pay increases for a period of time. Oftentimes, salary freezes are implemented because of a global event like the COVID-19 crisis, economic uncertainty like recession where there is a potential destabilisation of the economy, or when the organisation is faced with financial constraints. In some cases, pay freezes can also be attributed to budget cuts.

Businesses will often be forced to tighten their financial expenses as well as salary budgets and keep fixed costs under control, particularly in difficult times when their business performance is poor.

Consequently, a salary freeze tends to demotivate and demoralise employees, often leading to unhappiness and declining productivity. For employees, it will just be a waiting game and not knowing how many months your salary could be frozen for. However, how you respond to such freezes may depend on the situation.

In the case of a major global event such as the ongoing coronavirus pandemic, people tend to be more understanding if a company decides to freeze wages because everyone else around the world is facing the same challenge and it is unlikely that you will be able to find a new job quickly. However, if it is a situation where the company is having financial difficulties, it is more likely that you’ll reconsider your career choices and resign.

From the perspective of employers, wage freezes are often done out of necessity because of financial constraints. Furthermore, such freezes are only meant to be temporary measures to help companies avoid laying off employees. More often than not, we expect pay raises to be reinstated when the situation improves.

can your employer freeze your pay?

To cut to the chase, your employer is allowed to freeze your wages and there is no legal obligation for a company to increase their employees’ wages or grant bonuses. Furthermore, matters like your annual bonus or salary increase has to follow the company policies. They are also tied to the employee's performance so it will vary for every staff.

Salary freezes and pay cuts were commonly seen in the past two years as the pandemic has stifled economic growth, leading many companies to scale down their operations in order to cut costs.

Randstad’s Workmonitor survey revealed that 61% of Singaporeans have not been promoted nor received a salary increment during the pandemic, with a further 7% not receiving a salary increase despite being promoted. This trend is also echoed in Malaysia and Hong Kong SAR where more than half of employees reported not having received a pay raise despite some having been promoted. 

However, employees can rejoice this year. With economies on track for recovery in 2022, many firms are planning to lift cost-cutting measures and restore salary raise.

what to do when your salary freezes
what to do when your salary freezes

how to handle a wage or bonus freeze as an employee?

A wage freeze is always going to be disappointing and can make us react emotionally. So, how do you handle this extremely stressful and difficult situation?

Here are 3 actions you can take to handle your salary freeze and manage your salary expectations while maintaining your employee morale.

1. have an open and honest conversation with your manager

The first thing to do is to have an open and honest conversation with your supervisor or boss. It’s important to clarify why you’re receiving a pay freeze, how long it will last and who else is affected. Even if they cannot answer all of your questions, it at least helps you get an understanding of the situation before you make any decision about your career.

2. negotiate for alternative benefits

Negotiating with your employer is another option to consider. Even if the company cannot grant you additional financial benefits, your manager might be willing to offer non-monetary benefits as an alternative option such as flexible working arrangements or reduced working hours, transport allowance or additional paid leave days, as long as it's within the company policies.

3. maintain good attitude and work ethics

On a personal level, it’s important to maintain your professional working standards and reject the temptation to give less than your best. You may not be the only one who is affected by the wage freeze, your company leaders might have been affected too. Striving to always display a good and positive attitude and excellent work ethic will prove your value to your employer and demonstrate that you’re committed to your job and company.

Additionally, in a global recession such as the one caused by the COVID-19 pandemic, employees who choose to stay are more likely to be handsomely rewarded with a higher salary increment once the economy improves and wages are unfrozen. Salaries are expected to rise 3.8% for Singaporean workers in 2022 and this comes after bonuses and salaries had been frozen in 2020 due to the pandemic. Choosing to stick with your employer during a difficult period or change jobs depends on your career and life priorities and a decision should be made after careful deliberation.

what to do if your wage has been frozen for a long time?

Coping with a frozen salary is mentally taxing, even for the most resilient of us. Choosing to stay with your current employer might not be feasible when there is no clear timeline given by your employer as to when the temporary freeze to your salary will be lifted. It is natural to feel upset when you find out you'll not get a pay raise despite receiving a good performance review.  

If you have been riding it out for some time now and still feel unhappy and unmotivated, you could be on the lookout and find better opportunities by finding a new employer and company to work for. Consider connecting with our recruitment consultants to assist with your job search and expand your career opportunities.

Having a frozen wage for an extended time also usually means that you may be undercompensated for your work. To find out how much you should be getting paid, check out Randstad’s Salary Calculator. Simply take 2 minutes to key in your skills, responsibilities and work experience and you will get a free and personalised salary report that tells you where you stand in terms of pay, work responsibilities and talent demands in the job market.