A practice that gained steam during the pandemic but has not made headlines like the great resignation or quiet quitting is dry promotions. Are you asking yourself, what are dry promotions? It’s the practice of promoting employees without a pay increase.
If this sounds odd, you might be surprised to learn that in 2023, 37% of companies in the United States rewarded employees with dry promotions, up 3% from the prior year, according to salary.com.
According to a recent article from SHRM, providing employees with a new title and responsibilities without a salary increase is a tricky proposition. Companies may see it as a way to recognize value, whereas employees may see it as more work for the same compensation.
“When companies offer employees no-raise promotions, they must be willing to accept that they run the risk of losing that individual if they don’t feel like they are being fairly compensated for their work,” said Annie Rosencrans, SHRM-SCP, director of people and culture U.S. at HiBob, an HR tech company in New York City.
Companies must be transparent when using dry promotions, so employees understand why there is no pay increase. It could be a way to recognize and reward the employee, which will set them up for career advancement in the near future. For example, the employee may get direct reports, decision-making authority, or more access to senior leadership.
Promotions are an indicator that the employee is a high performer. And outside of money, culture is the top factor for employee satisfaction. Companies that provide a healthy work-life balance can offset some salary, according to joblist.com.
Executive leadership and human resources can use tools to measure employee engagement and the overall pulse of the company culture. Career conversations, stay interviews, and anonymous surveys are suggestions from SHRM.
Per Korn Ferry, companies may be trying to right size compensation after they had to pay higher salaries during the worker shortage of the great resignation. Another possible reason for dry promotions is higher pay for employees who lived in lower-cost-of-living areas during the same period.
The article also cites employee’s desire for learning and development opportunities when pay increases aren’t available. The growth afforded by a dry promotion may be enough to offset no increase in pay, with the anticipation that the increase will come in the future.
The Korn Ferry piece notes the risks to employers who use dry promotions, “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.”
Dry promotions are gaining in popularity, and unless you have built a solid employee-centric culture, they could damage the organization and lead to increased turnover. If you’d like to learn more about building your culture, send us a note.