Offering A Dry Promotion – Pros And Cons For A Business Owner

Regardless of how much an employee loves their job, consider the business their family, or are loyal to their colleagues, their primary motivation is being paid. For this reason, a dry promotion, which is a promotion without a raise, can impact morale and job satisfaction and even might signal meetings with HR – if it’s not done right.

But how would a dry promotion be done right? In this article, we will discuss why a business may choose to offer a promotion without a raise, the concerns, and how to handle conflict and resolve the situation to benefit both parties in question.

Why Offer A Dry Promotion?

A 2024 report by Pear Meyer and RMG noted that around 13% of companies in the UK have offered dry promotions, an increase from 8% in 2018. There are reasons why a business would opt to offer a dry promotion, rather than one that accompanies a raise – which is often promised later.

Some of the reasons are as follows.

Constraints

Many businesses that grant a new job title with new job responsibilities without a pay raise typically do so due to limited budgeting constraints, especially in times of financial insecurity. The company’s requirement for the job role is essential, but they cannot afford to hire a new staff member to fill this role.

These situations call for a dry promotion for the following reasons:

• Little to no revenue lost – The dry promotion from one role to another has likely left an unskilled, coverable or cheaply outsourced role open in favour of a harder-to-fill role that will save money. Nonetheless, this is an option that is only available for original staff members, as it’s unlikely that external prospective employees would take the role with the current salary.
• Quick resolution – Promoting instead of hiring externally is not only cheaper, but it’s far, far quicker. Searching for the best candidates for a specialised role costs a lot of time investment, and there’s always the chance that the candidate does not work out, leading to lost time and money. Promoting from within the same company means you’re already sure of what your talent can do.

 

Maximising Employee Potential

Promoting employees that are within our company is a fantastic way to immediately resolve hiring issues, especially in times of financial constraint. Employees from within are already understanding the specific company culture and processes, making for a seamless transition. Studies by Korn Ferry show that, amongst firms, 37% used dry promotions – because of the importance of understanding specific company processes within that industry.

• Morale boost – Promoting within provides a morale boost. Understanding this is key, as it signals a company’s commitment to improving its staff, but problems begin when the new job title becomes harder, or if job satisfaction falls.
• Company loyalty – For those who are loyal to the company and want to see it succeed, something that requires a pre-existing good company culture, promotion without a raise can be seen as a necessary evil – especially if all staff could potentially see their jobs lost otherwise. But beware – a pay increase is always expected at some time in the future, and should the promoted employee leave or be taken by another company, it may begin a domino effect.

 

Best Practices For Executing A Dry Promotion

Offering a promotion without a raise will illicit reactions that vary significantly based on pre-existing employee morale and the industry. That being said, the following best practices apply evenly.

Effectively Communicate

To properly sell dry promotions, you must know that the key is to balance expectations with the upcoming reality. The employees must understand why the promotion does not come with a pay increase right away. Open and honest communication should result in the employee realising that the company is not doing as well as it once did, and it requires their help to set the board straight.

By setting the stage, you are allowing the candidate to make an informed decision. That being said, it’s worthwhile that you should outline proper expectations as to when the salary increase may occur, as well as any other benefits the candidate may be entitled to for taking on more responsibility.

This can result in several outcomes:

• Loyalty – By coming forward with this to the employee, you could engender loyalty within them. They will feel seen, heard and valued, resulting in higher job satisfaction, as well as being a window into the higher ranks.
• Morale – This could affect the morale of the employee, and possibly the workplace, positively. They may realise that their work matters now more than ever and that it will take a team effort and hard, coordinated work to push the business forward.

 

Job Satisfaction vs Pay Increase

Financial compensation is important, but so is job satisfaction. It’s well documented that a more senior role with more responsibilities and changes in day-to-day circumstances tends to be a more valuable experience, thereby increasing satisfaction and happiness within the role.

That being said, there are other benefits to outline in your job offer, such as:

• Increased autonomy – Senior roles tend to be less about following a day-to-day schedule, and much more about using your initiative to meet the ends of the company. This can lead to a person feeling as though their actions are the result of the company’s success, rather than a spreadsheet solution.
• Professional development opportunity – Much like how proficiency in their old role leads to them specialising, proficiency in their new specialised role can lead to a higher level of work and salary. Even if the salary is not there at present, experience in the role qualifies them for work elsewhere, as well as being a powerful tool in future promotions or salary negotiations along their long-term career goals.

 

Non-Monetary Compensation For A Dry Promotion

Whilst more money is the most preferred of all compensation that a boss can give, other benefits may very well appeal just as much, especially if they are exclusively the result of the dry promotion.

• Flexible working hours – Flexible work hours are in high demand post-2020 quarantine. A dry promotion can be a reason to give the specific candidate access to these hours, better balancing their work-life balance, so long as they can manage their new responsibilities.
• Vacation time – Extra paid time off can be a meaningful reward. Although a company will not get the labour that they otherwise would for the expense, it’s a very small price to pay when considering how much money is saved.
• Broadened skillset – Access to a role and training that diversifies an employee’s skills is enough of a draw for many, as this rapidly improves their professional life and expands their options for job opportunities.

Risks Of Dry Promotion

The following are the risks that offering a dry promotion can bring.

Employee Morale

Although much of the morale of employees can be managed through proper negotiation, it’s important to understand that the fact that dry promotions are being offered is an obvious bad sign that inspires many detrimental mindsets:

• Termination – The fact that the company is not doing so well may lead many to prepare for their contracts to be terminated, or be laid off, etc – prompting them to look for work elsewhere to offset the risk.
• Resentment – Employees may feel that their employer is unable to ensure they are fairly compensated for their work, leading to feelings of discontent, resentment and lack of motivation.
• Pay decrease – Many employees may believe that pay decreases are on the way, which is a very quick way to lose employees.

 

Retention Challenges

The fact of the matter is, if an employee does well in their role, and gains experience or even recognition for their work, it will become harder over time to keep them for the following reasons.

• Overwork – People expect pay to scale with the amount of work being done. Whilst the candidate will understand for the immediate future, this can change as they become challenged by their new duties to the point that they feel the pay no longer justifies it. Dissatisfaction with this state of affairs can lead to them leaving.
• External offers – Companies that need to fill open positions of the role of the employee in question may find and notice the employees’ talents. It’s very common for competitors to scope out key talents within your company, and should they find out the candidate is being underpaid, they may try to steal them. If they can offer a pay raise that you can’t, there needs to be a lot keeping the employee loyal for them not to take the offer.
• Burnout – Studies have found that those who accept dry promotions tend to get burned out with their new role quickly. This is purely a psychological factor, especially in cases where they are now in a position to get a full view of the company’s status. This can lead to them keeping a new job search in the back of their mind.

 

Case Studies Of Dry Promotions

We understand that a promotion to a new job title without a pay increase is a scary notion for both the employer and the employee. It is effectively showing your hand and testing your workplace morale at the same time. This is why we’ve found a case study to provide an overview, to help you make an informed decision on whether or not this is the right move.

Korn Ferry is a global organisational consulting firm that has created a model that uses dry promotions, amongst other things, as part of a talent management strategy. This means that they lay out how to properly offer these promotion types effectively. The approach focuses on:

• Leadership development – The price of dry promotions, in Korn Ferry’s eyes, should be the development of the individual into a leadership position. Effectively, they gain great visibility in the company in exchange for preparing them for senior roles. This means that the role offered is not the end of the road – but the start of a long one.
• Skill enhancement – Korn Ferry provides extensive training and professional development programmes for the person who is being given additional responsibilities and duties, ensuring their skills are hyper-focused.
• Future compensation – The firm believes giving employees transparency when it comes to timelines is one of the most important things to do when offering dry promotions, but also that this timeline can be affected by high performance.

 

Tech Firms

In the tech industry, mobility is everything. Technological innovation is fast-paced – look no further than the sudden arrival of ChatGPT and how AI became a common conversational topic soon after. Companies like Google and Microsoft, two huge tech giants, use dry promotions to retain top talent by offering them to work on high-impact projects that push the envelope or lead teams. Of course, these companies are not plagued by budget constraints, and it’s to keep the talent in place by offering them key experience at the very highest levels of the industry.

Finance Sector

Financial service firms leverage these promotions to retain the highest performers, often being given titles like “Vice President” and “Senior Analyst” without a pay raise. This comes with high visibility within the company, as well as mentorship from senior leaders, and a chance to manage high-profile clients or projects.

Retail Sector

Dry promotions being used for store managers or regional leaders will likely involve them managing multiple stores or regions. This gives them access to operational experience and many additional perks such as performance-based bonuses.

Conclusion

Overall, a dry promotion can be a hard thing for many an employee to swallow. It’s all about picking the right person for the role, and ensuring that they are fully aware of why they’re being offered the promotion without a raise.

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