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I just had a meeting with the company's board, and we concluded that we would give out a bonus, but no pay raises this year. Last year was tough; the business was roughly 30% in the red. I think most people understand the situation, but I was upset hearing this in the board meeting.

Next month, I will have to communicate the message to my employee. Putting myself in my employees' shoes, I would not be happy.

I want to ensure that they are happy and understand the situation. I plan to start with, you get a bonus, then deliver the bad news, and close it with an opportunity for next years in terms of learning and growth.

P.S. Putting money aside, everyone in my team is happy with the work. We maintain a growth mindset, 15-20% of free time for self-study, knowledge sharing, and the bottom-up culture.

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  • Comments are not for extended discussion; this conversation has been moved to chat. – Lilienthal Feb 27 at 16:06
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    As an employee with a manager, who has a manager (etc), I am used to getting bullshit. I respect those who give it to me straight. "A bonus but no raise this year". Seven words. Any more is just management BS, and the more there is, the more likely I'll be scanning the job ads in my field. – Michael Harvey Feb 27 at 16:57
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Do not lead with the good news and then end with the downer. That is not a workplace thing, that is a general communication rule.

In addition, focus on the fact that the employee is in a group of peers. They are not singled out. It's the same for all in the company, you are all in this together.

So you could say something like

As you know, the company has not met the goals for 2020. That is hardly surprising and not our fault given the whole pandemic situation, but it is nevertheless the situation we have to deal with. Raising fixed costs of the company is currently out of the question. So nobody will get a raise this year. Not you, not me, not our boss. Nobody.

However, we want to recognize the good work people are doing. Accounting is having a panic attack just thinking about raising fixed costs, but we do have a few more options with one-time payments. So we decided that you will get a bonus this year.

Go on to talk about the bonus. Don't let the bad thoughts about "no raise" linger or dominate the meeting.

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    This seems the best way to do it, ending positive is basic. – Kilisi Feb 24 at 19:08
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    Because I've read through some psychology stuffs, I'm even tempted to suggest to avoid adding "However" in the second paragraph. It feels like it breaks the flow of positivity in the first paragraph. It could be reworded into: "We still wanted to recognize the good work people are doing". Ultimately the same thing delivered differently and not worthy of an edit since it's more of a personal taste. – Clockwork Feb 25 at 7:48
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    Probably a good idea. I'm not a native speaker anyway, the OP should find their own authentic wording, it's more of a guideline/example. – nvoigt Feb 25 at 8:21
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    @Clockwork I'm a bit puzzled by "the flow of positivity" you mention. Where do you find it exactly in "nobody gets a raise"? For me this "however" sounds more like it breaks the flow of negativity there, like a nice accent to start the second part on an upbeat note. I'm not a native speaker too, though. – Frax Feb 25 at 9:23
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    Make sure the information that NOBODY gets a raise is accurate before saying this. I was told a story that included "everyone has to take pay cuts or be fired" and when I asked how much of a pay cut they personally had to take I found out that they didn't have to and "everyone" only meant the peons. That made me think the people running that company were liars and pricks (and I didn't even work there). – Eric Nolan Feb 25 at 10:29
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I had this very news from my boss late in 2020. He explained that nobody was getting pay rises (which at least shares the burden equally) but there were some bonuses. I wasn't surprised about the pay rises, although the bonuses were unexpected.

You will find some staff feel that if there is money for bonuses, there must be money for pay rises. It will be worth your understanding why that is not the case, so that you can explain simply and truthfully. In my case, the company had decided to use some of the cash on hand for bonuses, but didn't feel confident enough about future income to increase its fixed outgoings on pay.

Edit: Here's a way to get it wrong, from the early 1990s:

CEO to site meeting: "I'm afraid we have have no mechanism for giving pay rises this year."

Engineer: "Do you mean we can't afford pay rises, or that we can't do the administrative work to change people's salaries?"

CEO: "Err, the former."

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  • Agreed. My boss told me the same news. I didn't get a bonus, nor did I expect a bonus. Many people are grateful to just have a job right now. As long as the employee feels the boss is being honest and not manipulative, it's fine. – Muz Feb 26 at 2:36
  • lol wow. That's bad communication. Dig your own grave with executive buzzwords and corporate speak I guess – DKNguyen Feb 28 at 2:59
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The place I work at was in a very similar position and I've asked manager "How come company has money for bonused but no raises? It looks like incoherent behaviour to line workers."

Now, this a big corpo so I understand budgeting might be tiered and complicated. My division got actually an extra bonus, so we did very good on the sales and some people got 0% salary raise. However, the explanation made perfect sense to me. Maybe it applies here too.

I was told that:

  1. Division yearly bonus budget is partially directly self funded, i.e. % of the sales division makes goes straight back to bonus budget, so this income does not leave he division to aid common budget.
  2. Salaries are paid from the common one, so general company results do impact it, since the company $$$ figures did not improve as expected in terms of growth, the budgets cannot really grow as well.
  3. Increasing salary is a longterm commitment, bonus is a one-time cost.

In short the division self-earned extra bit as a direct income feedback. It's better from a budgeting perspective to do a one-time write off for a bonus, rather than a longterm commitment. When a company wants to recognize the employees' effort, despite tough year, a bonus is an easier way to do it.

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    Definitely worth explaining why there is bonus money but not raise money, especially since people know that the higher you are on the food chain, the bigger the bonus. Most people don't think or care about fixed vs one-time expenses, but if there is a clear separation of funding sources that should be stated. – brichins Feb 25 at 17:37

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