In an uncertain economic climate, many organizations need to adjust their compensation strategy to stay within their financial means. Our previous articles explored two ways to achieve this: aligning HR strategy with budgetary reality and sharing risk through bonus programs.
However, beyond strategic choices, there is a human reality that no employer can escape: salary expectations. Influenced by the media, industry comparisons, and peer discussions, these expectations shape perceptions of organizational decisions. When raises are more modest than expected, reactions vary: acceptance, understanding, disappointment, even frustration.
How can trust be maintained and motivation sustained despite more modest salary increases? It all depends on a consistent approach between organizational choices, economic reality, employee expectations, and an honest assessment of what the employer has to offer.
Communication: the key to trust
When increases don't meet expectations, a lack of explanation can quickly lead to frustration. Frances Frei (Harvard Business School) reminds us that trust is based on three pillars: empathy, authenticity, and logic. These become essential when making sensitive announcements. Employees need to feel that their managers understand their reality (empathy), remain true to their values (authenticity), and can clearly explain their decisions (logic). If one of these pillars is weakened, trust erodes. It is therefore not enough to simply deliver a message: you must embody a credible, consistent, and human approach.
Here are the key elements to include in communications:
- Explain the reasons. What internal factors influence decisions? Revenue, operating costs, economic projections... naming the constraints reinforces credibility. Relate your choices to objective data, such as the consumer price index, industry averages, or industry practices. This helps to situate the company's efforts in the real economic context.
- Highlight the elements of total compensation: benefits, wellness programs, etc. It is essential to broaden employees' perception of their compensation.
- Present the prospects, including the possibility of salary reviews, future bonuses, or incentives, if applicable. Also highlight opportunities for development or advancement. Encourage high-performing employees by offering them a clear vision of future opportunities.
- Provide context with historical increases: if increases in previous years have been above the market average, now is the time to point this out. This positions the current situation as a temporary adjustment, not a disengagement.
According to several studies, satisfaction with a pay raise is often short-lived. On the other hand, recognition, progression, and a sense of fairness support long-term commitment.
Equip managers: strategic players
Managers must be able to explain decisions credibly. If they don’t understand the logic, the messages will be contradictory. Equipping them does not mean providing them with a script, but rather offering clear explanations, examples, and the space they need to adapt their message to their team.
Clearly explain the compensation philosophy and principles of fairness
Decisions are better accepted when they are based on clear logic. It is essential to:
- Explain the salary structure and its mechanisms;
- Present the reference market used;
- Clarify the paths for advancement;
- Validate internal equity;
- Align compensation with the organization's values.
This framework makes the subject more transparent, more understandable, and therefore more readily accepted. Managing expectations is also a task that takes place upstream: preparing the ground before the announcement avoids shocks or unpleasant surprises.
Beyond salary: other motivational factors
Motivation is not based solely on salary. In times of budget constraints, non-monetary incentives become even more important:
- Flexibility (working hours, teleworking);
- Wellness leave;
- Professional development;
- Informal recognition;
- Stimulating projects or expanded responsibilities.
Ignoring these factors, or waiting until salary disappointment sets in, carries a real risk of demotivation. Inaction often costs more than the difficult decision itself.
A delicate touch to maintain trust
Managing salary expectations during a downturn is tricky. It's not the amount that demotivates, but misunderstanding, inconsistency, or perceived unfairness. By focusing on proactive communication, emphasizing total compensation, equipping managers, and clarifying the rules of the game, organizations can maintain and even strengthen trust.
It is during times of turbulence that the strength of the bond between an employer and its teams is measured.
Compensation is not just a matter of numbers!
To learn more, contact our experts!
Juliette Trachy
Senior Advisor, Compensation and Human Resources Consulting Services
