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Not uncommon, glad they are able to provide something. We are doing 3% increases this year. Had a really bad year last year and was over 10% under projections.
Yikes. I would suggest spot bonuses vs trying to sell a 1/2% raise!
Pro
Woah. What industry is this???
I think you just present the news neutrally without commentary. Stay professional, but certainly don't get ahead of any of the inevitable backlash. If turnover rises present the stats without comment. If people start getting unruly in work chats mention it. Do your job, but stop covering for bad policy. Take a step back and try to refresh your resume for somewhere better.
As you are posting with the title HR Director, it is your responsibility to deliver the news to the team, in the best light.
You don't say that you don't agree with it, as a senior manager, you must agree with the business when it comes to such matters.
You need to say that for now, there will not be the usual 2% increase (and why, I assume the company profits are not down) but hopefully this will pick up in the near future.
0.5% is still better than nothing. And it is still better than not having a job.