Consideration To Take When Awarding a Promotion Without a Raise.

Question:

Can I (ethically/legally) give an employee a promotion without a raise? There’s a backstory. At the end of 2019, I promoted a male employee and increased his pay. Now I’d like to promote a female employee, but since COVID hit my department doesn’t have the budget to increase her pay.  

Answer:

Yes, you can legally promote an employee (female, male, or other) without giving them a pay raise. However, you have to provide legitimate reasoning for doing so. And what counts as “legitimate” depends on where your business is located. Pay attention. 

As a starting point, federal law—as enforced by the Equal Employment Opportunity Commission—prohibits employers from using the following criteria to justify promotion or pay differentials among employees: 

  • Race
  • Color
  • Religion
  • Sex (including pregnancy, sexual orientation, and gender identity)
  • National origin
  • Age (40 or older)
  • Ability
  • Genetic information 

After considering federal law, you also need to look into your state and local laws. For example, if your company resides in Colorado, then the Equal Pay for Equal Work Act will limit the set of conditions you could use to justify sex-based pay differentials to the following:

  • Seniority 
  • Merit 
  • Quantity or quality of production
  • Geographic location 
  • Education, training, or experience reasonably related to the work in question
  • Travel

Those are the legal considerations. Next, let’s talk about the ethical considerations of giving a raise-less promotion. 

The Normalization of Raise-less Promotions

Promotions without a pay raise have increasingly become the norm

Between 2011 and 2018, the percentage of HR managers who say it’s common for their organization to promote employees without raising their salaries jumped from 22% to 39%. Only 20% of HR managers say they don’t offer promotions without a raise. 

On the other side of the table, a full 64% of employees* say they would be willing to accept a promotion even if it didn’t include a raise. That makes sense. Promotions keep employees engaged. They challenge employees with new projects, responsibilities, and strategies. They reward employees for a job well done. They boost resumes and increase prospects in the job market. 

But the value of raise-less promotion only goes so far. Without financial compensation for assuming more responsibility, alignment between workload and pay strays. This divergence sends a message to employees that they are not valued equitably. Or that the worth they bring to the organization is negligible. 

Because women’s work has been systematically devalued and under-compensated for centuries, companies must ensure they do not aggravate matters of equity when it comes time to promote and pay their employees. 

How COVID-19 Changes the Promotion Conversation

COVID-19 has wreaked havoc on businesses around the world. This has led to widespread layoffs, furloughs, and hiring/salary freezes. It sounds like your department is under similar constraints. 

So if COVID-related budget cuts are keeping you from increasing an employee’s salary after awarding her a promotion, then be sure to follow these three parameters: 

  1. Clearly and empathetically communicate (verbally and in writing) why the promotion is not attached to a pay raise. 
  2. Establish a timeline (and put it in writing) to revisit a pay raise in the next three to six months. 
  3. Explore alternative compensation options. Note: such alternatives are not meant to replace a future pay raise but rather to show the employee that you value their increased contributions to the team.   

*64% is the aggregate percentage of employees who reported willingness to take a promotion without a salary increase. When disaggregated by gender, that becomes 72% of men and 55% of women. Unfortunately, we don’t have race/ethnicity information to further disaggregate the data. We also don’t have data to understand why more men versus women say they would accept a promotion without a pay raise. 


This article was originally published here

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Katica Roy

Katica Roy is a gender economist and the CEO and founder of Denver-based Pipeline, an award-winning SaaS company that leverages artificial intelligence to identify and drive economic gains through gender equity. Pipeline launched the first gender equity app on Salesforce’s AppExchange. The Pipeline platform was named one of TIME Magazine’s Best Inventions of 2019 and Fast Company’s 2020 World’s Most Innovative Companies. In 2019, Katica’s articles garnered over 1 billion impressions. Learn more at www.pipelineequity.com
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