Let’s be honest: 2025 was a tough year for many organizations and the people who work for them.

As a new year begins, employees may be expecting raises, bonuses, or at least conversations about compensation while employers may be facing tight budgets and difficult decisions. How you communicate limited or no pay increases matters just as much as the decision itself.

Employees are more likely to stay engaged when they understand the why. Avoid vague explanations or corporate jargon. Instead:

• Acknowledge the economic reality your organization is facing
• Be transparent about business challenges (without oversharing)
• Explain how compensation decisions were made

A simple, honest explanation builds more trust than silence or deflection.

In addition to this, keep in mind that compensation conversations are often uncomfortable and personal. Even when pay increases aren’t possible, employees still want to feel seen and valued.

• Acknowledge that rising costs and financial stress are real
• Thank employees for their contributions and resilience
• Avoid minimizing disappointment or rushing the conversation

Compassion doesn’t require changing the outcome but it does change how the message lands. Instead, you should focus on what is possible.

If raises or bonuses are limited, highlight other forms of investment:

• Career development or training opportunities
• Flexibility, remote options, or schedule stability
• Clear paths for future growth or promotion
• Non-monetary recognition and appreciation

Employees want to know that the organization is still invested in them even if compensation growth is temporarily paused.

One of the biggest mistakes employers make is leaving managers unprepared to have these conversations with members of their team. Managers should know:

• What they can promise (and what they cannot)
• How to respond to emotional reactions
• When to escalate concerns to HR

A poorly handled pay conversation can undo months of engagement and trust.

If your organization is navigating widespread compensation concerns, morale challenges, or difficult one-on-one conversations, you don’t have to do it alone. We support employers in crafting compassionate, legally sound communication strategies that protect your organization and your people, especially during tough moments like these. Get in touch with us here.