Employee Promotion Policies Can Attract and Retain Talent

While employee promotions positively affect engagement and motivation, very few organizations (16 percent) widely communicate their promotional policies for recruitment or employee retention, according to a 2012 WorldatWork survey report, Promotional Guidelines.

The survey was fielded in August 2012 among members of WorldatWork, an association of HR/total rewards professionals at mostly large North American companies.

“Organizations consistently undercommunicate promotional guidelines and policies to the general employee population,” said Kerry Chou, CCP, a practice leader at WorldatWork. “Employers may be missing out on an opportunity to enhance its ability to attract, motivate and retain employees by not sharing general information about the guidelines or processes associated with promotions.”

Average Size of Promotional Pay Increases

Even though employers choose not to share promotional guidelines with employees, they continue to budget for programs that support employee advancement and promote about 8 percent of employees in a typical year. Among other survey findings:

• The average promotional increase awarded to salaried employees in 2012 was 8.7 percent, up from 8.3 percent in 2010.

• Officers/executives received an average promotional pay increase of 10.2 percent, compared to the average of 9.5 percent in 2010.

• The most common method of funding for promotional increases was by establishing a budget separate from other pay-increase budgets.

Prorating Merit Increases and Bonuses

With regard to determining merit pay raises and incentive pay:

• 43 percent of organizations awarded a prorated merit increase following a promotion.

• Nearly half of participating organizations (46 percent) prorated the old and new rates of pay when determining bonuses or incentives after a promotion, while 29 percent determined the bonus and/or incentive based on the new rate of pay and/or new bonus rate.

Promotional Policies

While promotional policies tend to vary from one organization to another, there were areas of consistency:

• Most organizations defined a promotion by the increase in pay, band, grade or level (81 percent), or the addition of higher-level responsibilities (76 percent).

• While most organizations had tenure requirements before an employee was eligible for a promotion, nearly half allowed promotions right away.

• At a majority of organizations (57 percent), employees were not eligible for promotional increases if they were moving laterally to a new position.

• Nearly 1 out of 5 organizations awarded promotions without a pay increase.

“While a bigger title and recognition from peers are nice, employees will usually not feel completely satisfied with a promotion unless there is a meaningful increase in base pay,” Chou advised.

Related Articles:

'Weighty' Performance Appraisal Dilemmas, SHRM Online Employee Relations, December 2012

Promotions: Is There a 'New Normal'?, SHRM Online Employee Relations, February 2011

Helping Employees Step Up, HR Magazine, August 2007

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