Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Salary Freeze

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 cash. As a way to save money, Company XYZ institutes a salary freeze. Under the salary freeze, no employees will 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.