What it is:
A salary freeze is a temporary cessation of pay raises.
How it works (Example):
For example, Company XYZ makes widgets. Company ABC recently launched the new iWidget, which is taking away a significant amount of market share from Company XYZ. Company XYZ is now having trouble generating enough . As a way to save money, Company XYZ institutes a salary freeze. Under the salary freeze, no employees be awarded raises until further notice.
Why it Matters:
Salary freezes are a way to reduce expenses. In many cases, they can indicate the presence of larger problems at the company and can damage morale, which can increase turnover among employees.