The Dilemma of Dry Promotions.

A stressed HR head approached me recently, saying, “Our team expects promotions every 2-3 years, but we lack enough roles and budget for raises.” To keep employees, he started creating new levels and giving promotions without pay increases. It worked for a while, but soon, frustration set in. Employees felt shortchanged.

Welcome to the world of “dry promotions”. You have been promoted. You have a new designation and greater responsibilities, but there is a catch — your salary pretty much remains the same.

While dry promotions have been around for decades, they have gained more traction in the corporate world due to shrinking budgets, organisational restructuring and economic uncertainty.

Understandably, employers and employees view this trend very differently. While employers may feel a dry promotion is a pragmatic solution, employees feel like they’re getting a rather raw deal.

So, this week, my message focuses on evaluating dry promotions from both perspectives. As an employee, how should you respond if offered a dry promotion? As an employer, what steps can you take to make a dry promotion more attractive and beneficial for team members?

Receiving a promotion without a salary bump can be deeply disappointing for employees. “We want you to take on more work, but you’re not valuable enough to be paid more,” is the message received.

"Data shows a 29% attrition rate for employees within just one month of getting a dry promotion. Those who stay on run the risk of becoming disengaged and discouraged."

Ironically, the employer’s goal is precisely the opposite! A dry promotion is meant to support retention by re-affirming the employee’s value and strengthening their position within the organisation, even during financially constrained periods. At its most positive, it indicates the company’s commitment to the employee’s long-term career growth.

Simply put, while a dry promotion may be given in one spirit, it might be received in an entirely different light. And the reality is that such promotions are a mixed bag. They give employees a chance to continue growing their career, but in a limited way.

Do the non-financial benefits justify the increased workload? The answer to this question will depend largely on the personal priorities of the employee, how the management team handles the situation, and the willingness of both parties to reach a mutually satisfactory agreement.

For employees: how to respond to a dry promotion

While a dry promotion might make you feel undervalued, taking the right approach could help you transform it into a stepping stone towards future success. Here are five suggestions to consider before you get demotivated or quit:

1. Evaluate with a cool head.

Take a step back from your disappointment and assess the broader context. Has the company treated you fairly so far? Do you generally feel valued by your manager? Could this promotion indicate their trust and confidence in you — despite the missing financial component? Do your new responsibilities align with your career objectives? Thinking about these factors will help create the clarity you need for a more objective analysis of the offer.

2. Account for other perks.

Don’t overlook the non-financial advantages. Although it lacks monetary reward, a dry promotion can give you the opportunity to learn new skills, elevate your visibility and give you more authority within the company. Also, think about benefits such as access to senior leaders, travel to relevant markets, participation in crucial projects, and so on.

3. Negotiate additional benefits.

A dry promotion presents a chance to negotiate for perks such as flexible hours, career development options, extra vacation days, bonus eligibility, recognition programmes, etc. Approach the negotiation with a win-win mindset. Be confident, calm and courteous: thank your employer for the offer and explain your reasoning for seeking non-monetary benefits. Focus on a few specific items that are a priority for you. It can also be helpful to show how these benefits will support your work outcomes, along with being a good way to compensate for the lack of financial incentive.

4. Set a timeline for pay hike.

Often, a dry promotion has the potential to turn into a full-fledged promotion. Your employer might be able to increase compensation when budgets allow or when they are confident you can handle the new responsibilities. Discuss the possibility of a raise in the future and aim to identify a realistic date to revisit the terms of the promotion. (If your employer fails to make good on the promise, it may be time to look for greener pastures.)

5. Be collaborative.

If you are excited about the new role and keen to make the dry promotion work, then be sure to go into discussions with a collaborative stance — rather than taking an adversarial tone. Communicate your awareness of the financial challenges at play and focus on shared goals. Demonstrate flexibility and be willing to consider alternatives suggested by your employer.

For employers: how to approach a dry promotion

Companies see dry promotions as a way to recognise and encourage talented team members, enabling them to grow without increasing costs. Such promotions can also help to plug organisational gaps without having to hire someone new. In times of economic instability, they offer a way to keep things moving despite salary freezes.

While this all sounds well and good from a company point of view, it is important to realize that dry promotions can have an unintended effect on employees. As Annie Rosencrans, People & Culture Director at HR tech firm HiBob, says in an article in SHRM:

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.

It is also worth considering the potential price of lost experience and replacement. When disgruntled employees quit, the company will need to bear the cost of looking for new candidates, hiring them (likely at a higher base salary) and getting them up to speed. Which begs the question: would it have been more economical to give the promoted employee a raise after all?

Overall, traditional promotions (i.e. with a pay hike) are still widely accepted as ideal for retaining talent. However, if you genuinely feel a dry promotion is the best way forward, approaching it strategically can help avert a negative response and smoothen the transition. Here are four recommendations to consider:

1. Reinforce value.

Dry promotions are generally given to high-performing employees. When making the offer to your team member, acknowledge how much you appreciate their contributions and explain that they have been selected for their new position based on their outstanding work.

2. Be open and honest.

Share the reason for why you are unable to offer a salary increase at this time. Talk about the likelihood of a pay hike down the road and, if possible, set a feasible timeline to revise the compensation terms. Be transparent and avoid making unrealistic commitments.

At times, a promotion may be “dry” because the employee already has a higher-than-usual salary. This is well explained in an article by Mercer:

An employee may be currently paid for their potential versus paid for the role they currently have. This may result in the employee being overpaid for their current position. The employer…wants to encourage career advancement for that employee, but increasing their pay will cause equity issues or even reduce their ability to receive pay adjustments… They may offer the promotion with new responsibilities and title, but inform the employee that they’re already paid competitively for the new role. Presuming the employee agrees with the assessment, this promotion may better position them in the new range for larger pay increases down the road.

3. Present the bigger picture.

Explain that the dry promotion signals your commitment to the employee’s long-term success. Share your vision for their career progression and outline how the new role will support their professional ambitions. Discuss key advantages such as increased visibility, more decision-making power and expanded skillset.

Keep in mind that a dry promotion should offer something new and different. If it simply involves doing more of the same work, the employee will be much more likely to leave. Also, remember that repeated dry promotions erode goodwill and trust. Rather than becoming a way of life, such promotions should be used sparsely and only when required.

4. Negotiate non-monetary benefits.

If you can’t offer a salary bump, what about other benefits? Don’t underestimate the value of perks like flexible hours, additional leave, mentorship, recognition and training programmes. Make up for the absence of monetary benefits by coming up with creative solutions aligned with the individual’s priorities.

If a traditional promotion with a raise isn’t on the cards, a dry promotion could be the second-best alternative. Employees should carefully consider the pros and cons of the offer before making their decision. Companies, on the other hand, would do well to negotiate in good faith and be willing to provide non-financial benefits to facilitate continued employee engagement and commitment.