What is a Salary Freeze?

A salary freeze is a temporary cessation of pay raises.

How Does a Salary Freeze Work?

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 Does a Salary Freeze Matter?

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.