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Employee Relations in a Wage Freeze World

While Canada appears to have weathered the worst of the economic downturn, many organizations and industries continue to suffer as they wait for markets and the economy to improve, not just in Canada but around the world. One of the legacies of the recent recession is that many employers will continue to practice restraint. For many employees, that means a wage freeze that will likely last for the next couple of years.

Brian W. Pascal
This is certainly true for many of the public and para-public sectors, but it will also extend into hard hit industries like manufacturing and forestry. Even sectors like banking and financial services are not exempt from blanket wage freezes as employers seek to recoup the losses of recent years and restore their profit levels and market shares for the future.

In parts of the private sector that have felt the brunt of the recession, particularly the primary resource industries and the automobile sector, workers are not only having their wages frozen, but in some cases, their wages and benefits have been actually rolled back. Those sectors which survived the downturn successfully are not immune. Any wage or salary increases are likely going to be tied to performance and productivity improvements. These actions by employers, whether imposed unilaterally or negotiated with unions, will have an impact on employee relations as we move forward.

The public sector is where the impact of wage freezes is going to have the major impact. That is because public sector workers have been mostly protected against the market forces that have sent world markets and major financial institutions into a tailspin in recent years. They are simply not used to paying the price that so many other workers have paid to keep their organizations afloat in difficult times.

There will also be a major impact on managers, supervisors, and HR professionals in the new wage freeze world. Employees are likely to be less motivated, less inclined to put out that little bit extra and in some cases, downright grumpy or cantankerous. There will also probably be more complaining and a spike in formal complaints or grievances.

This situation is a bit easier to handle in the private sector because employees know when the business is doing well. They can see that there are fewer sales and fewer products being shipped out the door. Hopefully, senior management has provided a rationale for cuts or wage freezes, having provided full financial disclosure to its workforce. The more information that people have about the situation, the more likely they are to give it their grudging support. When offered additional incentives through productivity or performance bonuses, employees will not only accept but embrace the changes that are necessary to help the company move through a difficult period.

It is certainly more difficult to make the same case to an employee group in the public sector. Almost always, the decision to freeze wages has been made at a political level high above the pay grade of the manager or supervisor. In fact, many of them do not even agree with the political decision. They are not prepared to support or defend the decision and leave it up to the HR professionals to handle the fallout. This is not usually a good decision by managers or supervisors because they are on the front lines with employees. Those workers count on their bosses to help them get through this situation and not to wave their hands in the air and make it worse.

HR professionals play an important role in helping managers and supervisors take back control of the situation. They might encourage them to hold all-staff meetings to explain the situation as best as they can and allow employees to blow off some steam in a safe environment. They can also ensure that the lines of communication remain open between the unions that represent most public sector workers and the management team.

This will certainly help as minor complaints become formalized grievances in the highly charged atmosphere that surrounds a wage freeze or cutbacks, and may even be able to head off some of these complaints before they become too serious. The union representatives know that local managers did not create this situation. The greater the dialogue that occurs at the front end, the better the end result is likely to be.

Open communication with all employees is vital as the organization traverses the tricky wage freeze world. As directors and managers, you may not be able to raise your employees’ wages, but you can do a lot to raise their spirits and morale.


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