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No money for promised pay raise: Now what?

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in Employment Law,Human Resources,Leaders & Managers,Management Training,Performance Reviews

Q. Do we have to conduct regular performance appraisals and give annual increases? We told a new hire that we would, but now don’t have time or money to do so. — T.T., Alabama

A. That depends. If your new hire has an employment contract that provides for these pay increases, you’re obligated to meet the terms. If you have a collective-bargaining agreement that calls for regular raises, you’re also forced to pay up. On the other hand, if your new hire is an at-will employee, then you probably are not obligated to provide the promised raise in most states.

Some states do allow employees to sue for damages if they can show they were induced to take the job and gave up another position in reliance on the promise. If you made promises of this sort, consult an attorney.

Regarding performance appraisals, no law requires that you provide such feedback. However, it certainly is a good practice. Why skip the appraisal even if you can’t provide a pay increase right now? By providing feedback, you allow employees to see where they stand and can set goals for the next year. The appraisal can also provide a good opportunity to discuss the current financial constraints.

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