How to Inform an Employee They Did a Good Job but Get No Salary Increase

A happy employee is often a productive one.

A happy employee is often a productive one.

Abandoning merit raises altogether is rarely a good idea. People work to get paid and want to be compensated fairly for their time – “fairly” being the operative word, of course. But never underestimate the value of alternative forms of compensation. Many employees find them just as worthwhile as cash. Whether you’re a fledgling start-up or hitting a rough patch in your business, there’s more than one way to show your appreciation.

Step 1

Sit down with staff individually and be upfront and honest about the state of affairs. Avoid issuing a memo or staff email. It's impersonal and can stir up a lot of ill feelings, which can go a long way in dragging down morale and eroding productivity. From there, propose an alternative for the standard bump in pay.

Step 2

Put flex-time on the table – a far more practical option than cutting an employee’s hours to best match her wages. In lieu of raises, offer employees the option of starting and finishing the day earlier. Better yet, maybe a few of them would prefer to put in 10 hours four days a week rather than eight hours five days a week.

Step 3

Give an employee the option to work from home one to two days a week. Along the same lines as flex-time, telecommuting adds a great deal of flexibility to an employee's schedule. If your work is primarily conducted over the phone or on the computer, does it really matter where staff sits? Why not let them work from home once in a while?

Step 4

Offer employees a few extra days of vacation when you're unable to swing raises for the year, and for some people, time off is more valuable than money. So, it's win-win. If you’re concerned about the potential overhead this brings, add a couple of floating holidays into the mix instead, which you can easily stipulate must be used within the calendar year they’re given.

Step 5

Consider the option of profit sharing, where the employee gets a portion of the profits based on the company’s overall earnings. Cash is one of the more standard payouts, but you might want to provide payment in stocks or bonds.


  • If profit sharing isn’t an option, offer stock options – a right to buy stock at a certain price for specified period of time. Like profit sharing, employees reap the rewards of your company’s success.

About the Author

Based in Minneapolis, Minn., Dana Severson has been writing marketing materials for small-to-mid-sized businesses since 2005. Prior to this, Severson worked as a manager of business development for a marketing company, developing targeted marketing campaigns for Big G, Betty Crocker and Pillsbury, among others.

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