How to implement a wage freeze like Holden – without a backlash

When a prominent Australian business asks 1700 of its staff to accept a wage freeze for two years, the potential for backlash from staff, unions and stakeholders is high.

Car giant GM Holden has reportedly put the question to its Adelaide-based production workers, with a vote to be held on August 9.

The Australian Financial Review reported that the freeze is part of a survival package which will cut about $15 million in annual costs, with the goal of increasing the plant’s prospect of securing production of new generation models.

For SMEs facing tough conditions, a proposal like GM Holden’s may seem a viable option. However, in order to do it, there are countless issues that must be considered.

Randstad strategic account director Mike Roddy told SmartCompany this morning that situations like Holden’s are now reasonably common due to the austere economic conditions. But if a business owner chooses to go down this path, it has to be explained to staff.

“Some businesses don’t do it well,” he says. “You have to explain to staff that the business is struggling, that this is for the sake of survival and prosperity, that it will maintain a wage base and enable them to be innovative and productive.”

He says it is vital to be transparent about the issues that have led to this scenario, to show strong leadership and ideally consider other benefits that could serve as incentives for staff.

“Think, what can we give to enrich the work experience? It could be training and development packages…Gen-Y staff are keen on career progression, could they learn more?”

Roddy says a key strategy is to encourage staff to become part of the solution and welcome their feedback, ideas and strategies towards recovery.

However, Roddy says if there is a major backlash to the news, support from senior management and one-on-one consultations to discuss the situation are vital.

“Your senior leadership team have to be ambassadors for the message,” he says.

Also essential is not to make promises you can’t keep, Roddy says. He warns against giving guarantees of job security if this path is followed, and make it clear that the plan will be reviewed if circumstances improve.

“The idea is to retain your workforce,” he says.

Alternative options to save wages could be putting staff on part time, nine-day fortnights or job share scenarios where appropriate, Roddy suggests.