Promotions Without Pay Hikes: Is the Work Really Reward Enough?

One out of five companies claim to, on a very common or somewhat common basis, award promotions to employees without a salary increase, according to an OfficeTeam sponsored study of 508 HR Managers.

The survey asked: How common is it for your company to award promotions without salary increases? Respondents said:

  • Very common – 3 percent;
  • Somewhat common – 19 percent;
  • Not common at all – 63 percent;
  • We do not offer promotions without raises – 14 percent;
  • Don’t know/no answer – 1 percent

Can’t help wondering if we’re treading on thin ice here.

Bad idea: Promotions without pay increases

Back last December, my Compensation Cafe colleages and I participated in a holiday podcast where one of the questions we explored was “can learning and development really be considered forms of compensation?” The conclusion we tentatively reached (at least within the confines of a 45 minute podcast conversation) was: Perhaps… but if and only if learning and development opportunities are linked to the ability to advance within the organization.

I do subscribe to the view that employees must be willing to invest in their skills and put their capabilities on the line up front, if they want career advancement. I don’t subscribe to the idea that career advancement is an entitlement … or that employees deserve a raise every time they take on a new project or responsibility.

But for an employer to actually award a higher level position with greater responsibility and not deliver any increase at all? Unless the employee has exceptional development needs to address before they’re likely to deliver any value in the role and there is a plan in place to bring their base income along as they grow into the responsibilities, I think promotions without promotional increases are a bad idea.

Looking for more than rewarding work

Interestingly, a slim majority of the 433 workers also surveyed in the OfficeTeam study indicated willingness to take this leap of faith – 55 percent of them responded “yes” when asked whether they would be willing to accept a promotion from their company that didn’t include a raise. And in a tough economy, it is reassuring to know that many employees are willing to step up to the plate and take on more responsibility.

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But, as employers, we’d better be prepared to do right by them. Motivated staff with a “can do” attitude will be ripe for poaching by another employer who is willing to pay the going rate – or more – for their increased capabilities and contribution.

And yes, I recognize that this study may reflect a certain number of smaller employers and HR managers of limited experience – but really, this isn’t reward rocket science.

The work is rewarding enough? Maybe in the short term, as times continue to be tough. But this could also be the kind of short-sighted, cost saving tactic that comes back to bite us hard in the shorts later on.

This was originally published on Ann Bares’ Compensation Force blog.

Ann Bares is the Managing Partner of Altura Consulting Group. She has over 20 years of experience consulting in compensation and performance management and has worked with a variety of organizations in auditing, designing and implementing executive compensation plans, base salary structures, variable and incentive compensation programs, sales compensation programs, and performance management systems.

Her clients have included public and privately held businesses, both for-profit and not-for-profit organizations, early stage entrepreneurial organizations and larger established companies. Ann also teaches at the University of Minnesota and Concordia University.

Contact her at abares@alturaconsultinggroup.com.

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