A Sample “No Salary Increase Letter” To Announce a Pay Freeze

Navigating salary decisions is one of the most sensitive jobs for HR teams. Transparent communication is crucial to maintaining trust and morale, even when delivering less-than-ideal news, such as a hiring freeze or salary freeze. Writing the necessary no salary increase letter requires care, clarity, and compassion to ensure that employees understand the decision while feeling valued and supported.

This article offers a comprehensive guide to creating a no salary increase letter, including practical tips and best practices for delivering the salary freeze notification. You’ll also find a no pay rise letter template that can be adapted to your organization’s specific needs and context.

Before crafting the no salary increase letter or any similar employee compensation communication, it’s essential to understand the context behind the decision. 

Various circumstances can lead organizations to suspend salary increases, such as:

• Budget constraints: Economic downturns, reduced revenues, or unexpected expenses may limit an organization’s ability to offer pay raises.
• Company performance: When overall organizational goals or financial targets are unmet, it’s common for salary increases to be deferred or paused.
• Individual performance issues: Sometimes, the decision is tied to an employee’s specific performance concerns that need improvement before a raise can be justified.

The first two reasons listed above can result in a pay freeze—a policy created by HR stating that no employees will receive a salary increase during a given period. Pay freezes are an excellent alternative to layoffs for organizations looking to improve their bottom line.

However, the third option relates to individual circumstances, which could demand a more careful approach and structured reasoning. In any case, addressing these topics transparently helps employees understand that the decision isn’t arbitrary and is based on valid factors.

As with many other communications between employers and employees, a no salary increase letter should strike the right balance between professionalism and empathy, given their potential repercussions in people’s lives. 

Here are the essential elements to include in your no pay rise letter:

1. Clear explanation of the decision: Start with a direct yet respectful acknowledgment of the decision. Explain the reason(s) behind it concisely and transparently, whether from organizational or individual performance factors.

2. Empathy towards the employee’s expectations: Acknowledge that employees may have anticipated a pay raise and validate their feelings. Empathy helps soften the impact of the message and fosters understanding.

3. Encouragement and support for future improvement: Highlight specific ways that the employee can work towards achieving a salary increase in the future. Provide constructive feedback if performance issues are a factor.

4. Alternative benefits or compensations: If applicable, mention non-monetary benefits being offered, such as training programs, additional leave, or recognition initiatives that support the employee’s development.

By addressing these components thoughtfully, HR teams will be able to maintain trust among employees and demonstrate a commitment to their growth despite current limitations.

Considering a salary freeze? It’s important to weigh all of your options and identify the most effective cost-saving strategies that will have the least impact on your employees and company brand. Click below to download our free reduction resources guide to implement the right cost-reduction strategy for your organization.

Below is a sample no pay rise letter that can be adapted to your organization’s tone and context. Remember that this template is for demonstration purposes only and does not constitute legal advice. Always consult with your own legal and HR departments to ensure. Always consult with the rest of HR and your legal team to ensure that you include all necessary language and comply with all applicable laws. 

Below is our sample no pay rise letter:

COPYABLE EXAMPLE: Subject: Update on Your Salary Review Dear [Employee Name], Thank you for your continued contributions to [Company Name]. Your efforts are valued and appreciated as we work together towards our shared goals. After a thorough review of company performance and budget considerations, we regret to inform you that we cannot provide a salary increase at this time. This decision was not made lightly and reflects current [financial constraints/company-wide policies/performance reviews]. We understand this may be disappointing and want to assure you that your hard work does not go unnoticed. To support your growth, we are committed to [specific actions, e.g., providing professional development opportunities, setting clear performance goals, exploring future compensation reviews]. Please know that we are here to discuss any questions or concerns. Your contributions remain integral to our team, and we look forward to continuing to support your development. Thank you for your understanding and dedication. Sincerely, [Your Name] [Your Position]

Employee compensation communication about a salary freeze involves more than simply sending a no salary increase letter. The “when” and “how” are two major factors in handling this situation tactfully and efficiently. 

Here are some best practices to consider for your salary freeze notification:

• Choose the best medium: Depending on the organization’s culture and the employee’s role, a face-to-face meeting may be more appropriate for the initial notification than a written letter. It allows for immediate dialogue and conveys empathy more effectively.
• Plan on the timing: Deliver the message during a scheduled performance review or in a dedicated meeting to ensure the context is clear and focused. Avoid times of heightened stress or significant company changes.
• Prepare for the reactions: Be ready to address questions, concerns, or high emotions. Equip managers with clear talking points and encourage a compassionate approach to discussing the decision.

Ensuring fairness and compliance is paramount when making and communicating employee compensation decisions. By following the best practices below, you’ll protect employees and the organization while fostering a fair and ethical workplace environment.

• Ensure non-discriminatory practices: Verify that compensation decisions are free from bias and adhere to policies promoting equity and inclusivity.
• Comply with employment laws and contractual obligations: Review applicable legislation and contracts to avoid potential legal issues related to salary reviews.
• Maintain documentation: Keep records of salary discussions, performance reviews, and employee communications to support transparency and accountability.

When salary increases aren’t possible, offering alternative forms of compensation can help demonstrate appreciation for employees’ contributions. Consider the options below to help offset the disappointment of no salary increases and reinforce the organization’s commitment to employee well-being.

• Additional benefits or perks: Enhance employee benefits packages with wellness programs, extra leave days, discretionary benefits, or childcare support.
• Flexible working arrangements: Offer remote work options, flexible schedules, or compressed workweeks to support work-life balance and improve job satisfaction.
• Professional development opportunities: Invest in employees’ growth through training programs, certifications, or mentorship initiatives that enhance their skills and career prospects.

Delivering a no pay rise letter is challenging, but transparent and empathetic communication can help maintain trust and morale within the organization. HR teams can navigate these conversations with professionalism and care by addressing the reasons behind the decision, offering guidance for future opportunities, and exploring alternative compensation strategies.

Ultimately, as with many other HR strategies and tasks, the goal is to balance organizational needs with employee well-being. This way, you’ll be closer to ensuring a stronger and more resilient workplace.

At Careerminds, we believe that you can never be too prepared for your next salary freeze, salary reduction, reduction in hours, or other cost reduction event. Our arsenal of resources, templates, guides, and industry-leading outplacement services can help you navigate the delicate process. Click below to speak with one of our experts and see if we are the right partner for your organization.