Over the past several years most organizations across the country have cut back on employee reward programs, what with frozen salaries, minimal pay rises, shrunken incentives and even the scaling back or elimination of 401(k) matching funds. With unemployment having reached 10% at one point and today still above 8% employee compensation has stagnated.
However, with the economy now starting to show signs of life (fingers crossed) some elements of the workforce are beginning to ask when their employers would be reinstating those monies lost through recessionary restrictions and cutbacks. The viewpoint is that if a salary was frozen or if increases were restricted over the past few years, when better times arrive the company owes payback for that loss of income. Estimates vary, or course, but such an action would mean several additional percentage points of increase this year alone to catch up – perhaps more, depending on how fanciful the complainant is.
But that ain’t gonna happen.
When the 2011 fiscal year closed for most several months back, companies added up their figures, reported results, shut the books and then moved on into 2012. They will likely do the same for this year as well. So case closed. There is no going back to address what could've been but wasn't.
Unfair? Are you one of those who think that you’re owed those so-called “lost” dollars? Then consider the dilemma as a business problem for the company. Management will not want to be saddled with additional fixed and reoccurring costs just as operations are struggling to regain strength. While they will likely strive with renewed energy to reward performance in a competitive fashion, as long as it’s affordable given their financial posture, they will not revise their reward programs to pay for entitlement vs. performance, or on the basis of whether or not they’re doing well in a particular time period.
Ain’t gonna happen. That ship has sailed.
Companies cannot easily "make up" for revenue lost during those down times, nor can lost accounts be quickly replaced, never mind the price increases that had to be put off. So it hasn't been just the employees who had a lot to swallow. Each fiscal year tends to stand for itself, with little cumulative value past year-end. The same can be said about rewards, with little acceptance for the concept of being "owed."
Picture if you will the scene in the Boardroom when the "make up" question is raised – if it ever is. How much would it cost, this suggestion of returning to employees those increases that were lost during the dark times? Management would consider that the tight fiscal measures put in place for Human Resources, as well as other functional areas, were necessary to get the company through a rough patch. Now that better times are slowly returning it does make business sense to begin reducing those restrictions going forward or otherwise trying to return to normal operations.
The use of bonuses and merit increases will return to a greater extent in 2012, as will company matches for 401(k) contributions, but they will not be made retroactive. Companies will need to look forward, not backward.
To add incremental, unbudgeted funds to reinstate missed salary increases from a prior year is not going to happen, as management has its hands full bringing itself back to a healthy financial posture. Supplemental “make-up” compensation, especially in the form of fixed costs, would not be viewed as a financially sound strategy.
So stop asking and move on. Your organization already has.
Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations. He is also associated with several HR Consulting firms as a contributing consultant. Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation. He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.
Creative Commons image courtesy of quaziefoto