Smacked by a Wage Freeze

Oh dear me, this is just funny to me.  Our beloved premier in SK just announced that he is putting in place a wage freeze…which also happens to include my position as well.  This is so utter idiotic I can barely stop laughing.  Why?

Well to put it bluntly, I just got my raise… just last week.  So this will have utterly no impact until Jan 1, 2016 or so when I don’t get a raise next year.  Also the amount of the savings from this move is a mere $15 million dollars when the entire budget short fall in predicted to be $600 to $800 million dollars which puts the savings in the range of 1.9 to 2.5%…or nearly nothing.  To put that in perspective it’s like saying you plan to buy one less coffee out a week when you need a new roof on your house and have to replace your car in the same year, but have no savings in the bank and maxed out credit cards.

The reality of the move is entirely optics.  There is nothing of substance but rather the illusion of trying to be prudent with our tax dollars after being on a drunken spending spree in this province for the last several years (spending from 2008/2009  until 2014 increased 54%, see here for data).  And the cynic in me things this is the perfect way to set the stage to push all the unions to accept a 0% increase in their next contracts.

Anyway, the particular really stupid part of this move is they have failed to consider what they just did for a significant number of their employees: remove any motivation for them to even attempt working harder for the next year.  In my case, my performance goals have barely had the ink dry on them and now you tell me regardless of how well or horrible I do in the next 11 months I will get the same wage increase of 0%.  Just think about how much productivity is going to drop in the next year because of this little stunt, I can barely imagine the additional costs.  The cost to productivity will easily remove any of the savings in over the course of the year.

Oh well, perhaps I should be grateful their aren’t more manipulative and had said that almost everyone would get a 0% raise except maybe the best performers…then take that away at the end of the year…or give them just 1%.

The good news is as long as I hit my saving target over the next few years the raises are largely not required for my early retirement plan to work.  It just removes a bit more of cushion to the numbers.

So have you ever been under a wage freeze?  How long did it last for you? (Or worse yet, a pay cut?)

17 thoughts on “Smacked by a Wage Freeze”

  1. Good Morning 45;
    A pay freeze is the same as a pay cut as far as i am concerned. My Hydro, tele, house ins, car ins, etc all managed to go up some how. And I still have to pay them with the same take home pay? Sounds like a cut to me.
    I asked for a raise three years in a row and was told they were going to start a sales commission program. Nothing has happened and I have stopped asking partially because I am getting close to retirement. Guess what sales are looking like. They are dropping year to year. After all this is only to my advantage as they promised a commission based salary so the start point will be lower.
    So as you said, you get what you pay for and if you don’t want to pay then you won’t get the effort from your employees to improve th ecompany and improve their own lives

  2. Pay freeze sucks but at least you still have a job right? Ricardo is correct that a pay freeze is essentially a pay cut if you take inflation into consideration. You’re right that people will be less motivated to work this entire year, considering they are not getting the raise this year. When the review comes, the performance isn’t as good so people don’t get as big of a raise… it’s a compounded problem IMO.

  3. That really sucks. I am quite sure that pay freeze declaration from the premier with the help of media would make him and his party more popular. It is like I am feeding less to myself and my family members so that you as the taxpayers would benefit from this by paying 0.0000001% less tax. I laugh at visible political moves from politicians. I really do.

  4. @Tawcan
    You are right about having a job. Nothing “entitles” us to a job, nothing “entitles” us to a pay raise just because inflation went up.
    So yes, we should be happy, to a certain extent, that we are bringing home st least some bacon.
    I think what pisses most people off is the government waste (read mis-management)of hard earned tax payer dollars. Not everyone is wasteful just because they have a government job but when you hear about the golden parachutes just because they “did their job” well it gets under the skin a bit.
    Same applies to the private sector. No one owes you a job. They have to see that they can utilize your skills to build their company. If you can not commit 100% (sometimes more) then why should they raise your compensation for a “partial” commitment?

    Having said all that, if you see that things are improving at whatever you are doing then there should be some recognition of the commitment you have made to make things function better and that is usually, but not always, more dinaro in your pocketbook.

    Ricardo

  5. Interesting post. I’ll throw a couple of points up for consideration.

    Having worked in both the public and private sector, it is important to appreciate that unless you have a contract with your employer entitling you to a salary increase each year, you really shouldn’t expect one. I have worked in companies that weren’t able to offer salary raises for a number of years – not even cost of living. Just another great reason why we shouldn’t be living to the limit of our monthly budgets. That way a short-term freeze like this shouldn’t have much impact on your plans.

    For some, salary increases may be a motivator; however unless the incentives are exceptionally large (not usually found in public sector), I doubt these raises really have much impact as a motivator. Management styles, mentorship opportunities, encouragement, empowerment, responsibility and overall job task satisfaction tend to motivate better than an expected 3-5% salary bump likely ever will.

    Lastly, while nobody likes to hear that they won’t be getting a pay increase and though it may lead to temporary loss of productivity, I do think it was courteous of them to give you a year’s warning to plan and arrange your finances to adapt to the freeze. At least you won’t count on that increase to pay for a new pool next summer (recalling a certain Griswold Family Christmas and the anxiety that caused)!

  6. Usually I agree with this blogger, but the tone of this post just gets me. It speaks to the cultural sense of entitlement that workers who’ve never been through real tough times don’t have. I’ve worked at mine-sites abroad where a wage freeze that impacts a 3% expected raise means that 3% of the work force doesn’t have to get laid off. If you’re truly worried about keeping your job (or your coworkers keeping theirs) then you see a wage freeze as a fair thing.

    As for the comment about the wage freeze only being ~2% of the budget shortfall… Again, anyone who’s been through a real cost cutting environment will know that companies don’t close a $600M shortfall with a few big initiatives. Rather, it’s done by implement a hundred smaller ones.

    Lastly, the comment about how the wage freeze is only for visibility. That might be true – I’m not close to this particular issue. But, if you’ve ever been through any serious cost cutting experiences (I’ve been through two major ones in the past three years), you know that these small things are what get the message across. We had the espresso machine removed in a previous role. Did it save much money? No, but it sure sent the message that we needed to save money. That, in turn, caused people to watch how they spent money in the entire business and resulted in a much larger savings.

    Just thoughts… if you were truly scared about losing your job due to budget shortfalls, a wage freeze wouldn’t be cause for a post on this site.

  7. This is just more posturing by the government. Almost all government employees are unionized and follow a collective agreement. Sure saying there will be a “pay freeze” sounds good, but when all your doctor’s and nurses, firefighters, police, justice officials, and everyone else who is considered “essential services” goes for contract negotiation, the issue will just be brought to binding arbitration, and they will get a pay increase anyways. More smoke and mirrors is all it is.

  8. I’m ER’ed now, so wage freezes don’t apply anymore. But some of the dividend payers that I hold have cut their dividends lately (thank you oil crash), so I think is somewhat comparable to a wage freeze for the still working folk. Really, it’s more of an annoyance than anything else…won’t really impact my retirement, no more than the freezing of his wages will really affect Tim’s plan….now, if Tim loses his job, or some of my dividend payers go out of business, THEN we have something to talk about.

  9. If it comes down to a wage freeze or layoffs I’d take the zero increase and be grateful. I agree with Dave above on all points.This is probably one small part of a greater sized plan to reduce the shortfall .As to the point that next years raise is this years prime motivator for doing a good job now and getting paid at it , being an employer , reading this kind of irks me. I don’t usually take a governments side on things and I like what Tim is doing overall but this post seems like venting frustration. JMO.

  10. Mmm, re-reading my own post I have to admit I do sound a bit more venting than I intended. I can understand people’s points about being grateful to have a job, and sharing the pain. Yet I forget to explain some of my outrage about the situation.

    We just finished cutting over $25M last year in the company (in three separate rounds of cost cutting)and the shortfall isn’t in the company but rather in the government itself. So it feels like we are cutting further because our parent company screwed up.

    Also I really have never felt grateful to have a job. Perhaps I’m a bit to mercenary for some people, but I know I’m there for the paycheque. Brutal, perhaps, but I literally have no loyalty at all to my employer. I’m using them for money, they use my mind to make money…as long as we agree to those terms the relationship continues.

    Anyway, great feedback everyone. Thanks for keeping me honest.

  11. The tone of this post is very entitled – an attitude that is all too common among public sector employees. The reality is this: your salary is compensation for the job which you were hired to do. If you are not pleased with the compensation, incentives, or raises, you are free to seek employment elsewhere (unfortunately, public sector unions have removed your ability to advocate for yourself based-upon superior performance in comparison to your peers – the trade off between bargaining as a group is being evaluated as a group).

    To expect an automatic increase when both private sector companies and governments are being forced to reduce costs due to changes in their cash flow is the peak of entitlement. Remember, your public sector salary is funded by the economic activity generated by those very entities.

    I suggest that you spend some time working in the private sector – adding value and generating wealth through efficiency and innovation – and enduring and adapting-to full exposure to the unforgiving business cycle – before you belittle the difficult and necessary decisions which impact your otherwise cushioned career.

  12. @Robert,

    I’m not in scope…so I do get raises on my own merit. Second I’ve spent about half of my career in private so I’m aware of business cycles. Actually one of my more enjoyed compensation practices over the years was getting shares in the company. As such you had a direct link to the performance of the company. The crown corporation sector can’t offer that and thus tries various ways to simulate that to some degree, but to date I’ve haven’t seen one work yet.

    Tim

  13. Nobody likes not earning additional money. However, taking the attitude that productivity will drop merely because there is no wage increase one year suggests a toxic culture of complacency.

    I have had a number of friends who started out in the private sector and then joined government or a crown corp. They usually do it for the same two reasons: (1) a relatively stress-free existence, and (2) a defined-benefit pension plan. Four of these friends ultimately expressed shock at how little work they actually had to do in their government jobs. I know that four is hardly a statistical sample, but I suspect that you joined a crown corp for the same reason. In fact, at various times in my life, I have mulled that option over myself since, aside from a two-months summer job more than ten years ago, I have never had a 40-hour workweek in my life.

    While compensation in the private sector may be higher, at least in my industry (law), one has to consistently prove oneself, and the prevailing attitude is that adequate performance should be rewarded with a generous severance package. All in all, a one-year wage freeze in a low-risk environment with an excellent work-life balance hardly seems like the cruel and unusual punishment this post makes it seem like, especially since when taking into consideration your pension plan, you are making the equivalent of six figures with regular hours.

  14. Two small points – you can’t blame the government for taking some small action, as they obviously couldn’t cut wages to make up the whole shortfall, so they did the reasonable thing. If they had done nothing, people would bit_h that they were in a deficit but were still handing out raises. What action would you propose they do? The second point is very simply that nobody is chaining you to your desk. If you don’t like what happened and think you are being treated unfairly, leave and go to greener pastures. If not, stay, do your job to the best of your ability and make suggestions as to how to make things better.

  15. Just as a bit of context, you will still make your full salary this year. Think of those 1000s of workers and small private businesses that are going to have a very tough and scary year due to the massive reduction in activity in the Oil and Gas sector….this is why the SK Party needs to find reductions in every avenue possible. Many oil companies are demanding that us service providers drastically cut our rates or we get no work in 2015. What about our hard costs?, where do we make up the shortfall in revenue to cover costs? I took a pay cut in the last oil recession in 2008 to help my employer and they rewarded me when the cycle peaked back up in 2 years. Long term thinking sometimes has some short term pain.

  16. So here’s the thing. Employment is a supply and demand market. If you go down the street, and find a very similar job for another employer that provides better total compensation, then by definition you are underpaid, and probably should leave.

    If you can’t do that, especially if nearest ‘better opportunity’ is a significant distance away, then by definition you are fairly compensated.

    That said, I TOTALLY get the point that wage freezes are demotivational. From the employers business perspective, they need to look on the return on increasing your compensation. If they don’t you to be motivated, they just need to perform your job satisfactorily, then there is no short term need to motivate you either. Especially since we’ve already determined you’re fairly compensated.

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