In 2023 nearly one in four workers received a promotion without an accompanying pay raise. The pros and cons of «dry promotions» for firms and workers alike, Frances Weir writes in an article on finews.first.

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It’s a practice that gained popularity during the pandemic; since then, it has grown into a new normal for many employees. No, it’s not flexible work – it’s getting promoted without a pay raise.

Nearly one in four workers who were promoted this year received a title change and additional responsibilities, but no corresponding pay increase, according to a new survey. This year, 37 percent of workers got these so-called «dry promotions», a steady rise from 32 percent at the start of the century. It’s a trend that is likely to continue.

«Promotions without raises are more akin to a lateral move within an organization than a step up»

Experts say many companies are still trying to reset pay after handing out enormous increases during the early post-pandemic worker shortage. The dry promotions are also affecting people who moved to less expensive locations without corresponding salary decreases. At the same time, companies may view a dry promotion – much as they did during the pandemic – as a way to reward and retain high-performing employees while also keeping a lid on costs.

While a promotion without a raise may not seem all that attractive, experts say leaders are simply leaning into the desire among employees for more learning and development opportunities. Numerous studies show that employees, particularly those in the middle ranks of an organization, value training and skills development at least as much as they do compensation. Promotions without raises are more akin to a lateral move within an organization than a step up. Employees who take these promotions do so because they view them as good growth opportunities.

«To be sure, dry promotions also pose significant risks for employers»

Employees who accept a dry promotion are betting that their new responsibilities and skills will enhance their future earnings potential more than a raise would. They are willing to trade fewer income opportunities now for a quicker career track with more control. For many mid-level employees who are unable to move up because of older colleagues staying longer in the workforce, a bigger title and actual real-world experience are far more valuable than getting certified through an online course or taking a corporate training seminar to learn new skills.

To be sure, dry promotions also pose significant risks for employers. For one thing, they could make employees more marketable to outside organizations. One recent study, for instance, found that promotions in general, but particularly those without an accompanying pay raise, increase the likelihood that an employee will leave their company. This is partly because employees tend to view such a promotion not as the reward it was intended to be, but rather as more work with less flexibility for the same pay. As people reevaluate what they want out of a career, they may be more willing to leverage a dry promotion into another opportunity elsewhere that offers better pay or work-life balance.

«Promotions without pay raises are a slippery slope»

With the economy slowing and the labor market tightening, the growth in dry promotions represents a gamble on the part of both employers and employees. Or, as Tom McMullen, leader of the North America Total Rewards practice for Korn Ferry, puts it: «Promotions without pay raises are a slippery slope.»

Frances Weir is a British business psychologist and Associate Principal, Advisory, at Korn Ferry. She has a Masters’ Degrees in both Psychology, and Organizational Psychology, holds a Professional Certified Coach Credential with the International Coaching Federation, and has certifications in Project Management, and DE&I in the Workplace. She was an accredited member of the British Psychological Society for many years, where she was awarded a Postgraduate Commendation for her research on Organizational Culture.

 

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