Increase in promotions without pay rise

Increase in promotions without pay rise

A new report has indicated that many senior HR directors are handing out promotions but not offering a salary increase to match – and it’s putting retention of top performers at risk.

Amid widespread economic uncertainty, it may seem like a good idea to offer staff career advancement even without a salary increase, but not offering more pay to match an increase in responsibility is a sure fire way to see the back of key talent. “Due to company budget constraints, many employers are unable to provide salary increases in line with a promotion, placing retention of quality talent at risk,” Stephen Langhammer from OfficeTeam said.

If company budget constraints are really such that no additional remuneration can be offered, clear communication of the reasons behind this is integral to maintaining the employer-employee relationship. “Where employers often get it wrong is in the explanation of the promotion and remuneration process. Transparency and clear communication with staff is crucial to maintaining employee trust and loyalty, especially when managing expectations around financial rewards,” Langhammer said. 

If your organisation has experienced a decrease in buying power, the latest survey findings of more than 200 HR directors show you’re not alone.

  • 31% said their organisation currently has salary freezes
  • 37% wanted to review staff performance in a new role before offering a pay rise

The majority of HR directors recognise that salary and bonuses are a major reason employees will leave an organisation, but in the absence of buying power many are putting greater emphasis on alternative recognition strategies:

  • 33% offer flexible work options
  • 23% provide additional annual leave
  • 27% offer a performance-based bonus scheme instead of an across-the-board salary increase

According to Langhammer, it ultimately comes down to whether an employee can come to a positive agreement with their employer that balances their aspirations for professional development with remuneration for their efforts. “People like to be challenged, so setting out well defined measurable objectives at the start of a project that if met result in a bonus can help increase productivity and ensure employees are feeling valued,” he said.

[HR takeaway]

Retention experts say that companies unable to offer immediate pay rises in line with a promotion should be communicating with their staff about other options for compensation of their efforts – they could offer flexible working, an increased holiday allowance, training or other non-monetary rewards.