4 tips to promoting an employee: financial implications, benefits and title changes

Whether you have an employee who has developed their skillset over time and worked incredibly hard, recognising and rewarding them has to be one of the best parts of managing people.
4 tips to promoting an employee: financial implications, benefits and title changes

Whether you have an employee who has developed their skillset over time and worked incredibly hard, or the nature of their role has changed with an increase in responsibilities, recognising and rewarding an employee by promoting them has to be one of the best parts of managing people – it’s a great outcome for the employee and the business. In this article, we deep dive into promoting an employee – from explaining what an employee promotion is to the types of promotions that exist and what you need to do to ensure it is compliant with workplace laws.

What’s an employee promotion?

Employee promotions refer to the rise of employees into higher ranks. Promotions or career advancements are processes that enable employees to take on more duties within a company. This is often accompanied by an increase in salary, position, responsibilities, status, and benefits.

The concept of promotion encourages employees to work hard within their roles to progress. However, employers should consider both timing and reasoning when promoting an employee. If an employee is promoted too soon then they may become overwhelmed, and this may undermine their confidence to excel in their new role. Conversely, stalling a talented employee in a role they’ve become overqualified for may contribute to poor job satisfaction, and subsequently will lead to employee turnover.

Types of promotion

Promotions often require an employee to undertake greater responsibilities and duties in an expanded or new role. Promotion-based decisions can be made for several reasons including, an employee’s length of service, their experience, seniority or performance and even growth of the business. Broadly, there are four different types of promotions:

1. Horizontal promotion

A horizontal promotion rewards an employee with a pay increase, but little to no change occurs to their responsibilities. Under this type of promotion an employee is laterally progressed. For example, an individual who graduates and attains their degree may be horizontally promoted to reflect this advancement, whilst their roles and responsibilities remain the same, their pay may be increased to acknowledge this progression.

2. Vertical promotion

Vertical promotions refer to an upwards movement, or progression, of an employee who will undertake further development in their skills and experience. A vertical promotion often necessitates an increase in salary, responsibility, status, and benefits for the employee. Due to the nature of vertical promotions, an employee’s role may shift. These changes can facilitate a transfer between very different jobs.

3. Dry promotion

A dry promotion occurs when an employee is charged with greater responsibility within their role, however, there is no compensation to reflect this change. An employee’s status under this type of promotion may be increased, however, there is no rise in pay, or financial benefits offered in line with this progression.

4. Open and closed promotions

Open promotions refer to situations where every employee of an organisation is eligible to apply for a position, whereas closed promotions involve situations where only selected employees are eligible for a particular promotion.

Benefits of employee promotion

There are so many benefits to promotions, here are just some of them.

They enhance employee retention: promotions not only inspire employees to work hard and to achieve their career goals but also, encourage employees to grow and develop with the company, thus increasing employee retention and loyalty.

They’re cost-effective: employee promotion is also largely a cost-effective measure when considering the price associated with onboarding a new employee, rather than progressing an existing one into a new position.

They inspire the whole team to do well: Promotions also recognise the hard work of employees and serve as a reward for those who do well. This subsequently inspires other employees to work hard to achieve similar goals, ultimately increasing the general productivity of a company.

How to promote your employee

When an employee is successfully promoted, the employer should discuss this with the employee and identify what their new role and responsibilities are. In this discussion, the employer should also acknowledge the reasons for the employee’s selection and demonstrate the value that is placed on the employee’s skill set and their contributions to the company.

An employer should ensure that following the initial announcement of the progression, the employee is presented with a formal promotion letter. This letter should detail the new expectations for the employee regarding their roles and responsibilities, as well as their skills and achievements which led to the promotion. Any significant changes, such as the employee’s job title, job description or remuneration should be reflected in the variation or issuing of a new employee contract which should be in writing, signed and agreed to between the employer and the employee.

Citation HR can help. At Citation HR, we believe that success in business comes down to people. Thats why we’ve made managing people simple and easy. With hundreds of workflows, templates and policies, plus Employee Self Service (ESS) and a 24/7 HR Advice Line, managing people has never been easier! Contact us today to see how we can help.

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