As the labor market tightens and employees are ready to jump at new opportunities, a surprising number of companies are making a counterintuitive move: offering more senior job titles without the accompanying pay bump.
According to a June 2018 survey from Menlo Park, California-based OfficeTeam, 39% of HR managers said it’s common for their company to award promotions without pay increases, a 17-point jump from 2011. And 64% of workers reported they’d be willing to accept an advanced title that doesn’t include a raise, up from 55% in 2011.
Why is this happening? And when talent is in such demand, why would promotion-worthy employees accept a promotion without a raise?
Employees want professional development opportunities, and that may be edging out the need for more money in such decisions, says OfficeTeam district president Brandi Britton. “Money is maybe not as important to them as it was five years ago. Certainly it’s important, but on the priority scale for individuals, it’s their development and that ability to show career progression that’s more important,” she says.
The company view
From the company’s perspective, there may be several reasons that an employee is offered a promotion without a raise, says Mikaela Kiner, founder of Seattle-based human resources consulting firm uniquelyHR. Kiner says a title change may simply better reflect the work the employee is already doing without an additional increase in responsibility, or it may be a trial run for permanent advancement. And some companies have very regimented pay increase cycles. In those scenarios, the title-only promotion may make sense, but if it’s done routinely, “That would definitely be of concern in a number of ways,” she says.
Whatever the reason, a promotion is a vote of confidence in the employee, says Marielle Smith, vice president of people at GoodHire, a Redwood City, California, background check company. With more than 20 years in HR, Smith has seen companies give promotions without pay increases and says titles may be used as a reward for a job well done, she says. But companies are typically aware of the risks, she says.
“A title increase is a big deal. With a new title, you have the opportunity to find another job at a different company where you’ll get higher pay based on your new title. Companies know this, and without a comp increase, they risk losing you to another company,” she says.
A strategic move?
When an employee has the opportunity to take on a new title, but there is no expected pay increase, it’s time to be strategic. Kiner says employees should push for parameters, such as a trial run for six months at which time there will be a pay increase. Or that the employee gets an assurance that an appropriate raise will be forthcoming in the next performance review.
Alternatively, employees can use the opportunity to negotiate other parts of their pay package, such as flex days, additional vacation time, or other valuable perks, says attorney and negotiation coach Katie Lane, founder of Work Made for Hire Consulting, LLC in Portland, Oregon.
And don’t overlook the learning and development opportunities, Kiner adds. Work on defining what projects and learning opportunities will be open to you. Look for opportunities to do more of what you enjoy doing, or to work on projects that will stretch your skills. When Kiner was working at Microsoft, a mentor encouraged her to write out personal criteria for each role.
“Everything I could think of–what kind of manager did I want? What kind of responsibility did I want? And what was really interesting when I went through it was that the promotion I was being offered actually exceeded my expectations in many ways,” she says.
In the long run, lack of alignment between responsibility and pay isn’t tenable for anyone, Lane says. When employers don’t have the budget for pay increases to go along with more responsibility, they risk losing valuable employees who may use the new title to negotiate for more pay at a different company. But in some cases, temporary promotions without pay can act as situation-specific solutions that benefit both companies and employees.