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.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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