my employer has stupid rules for raises when you get promoted

A reader writes:

A year ago, I accepted a position at a global nonprofit. Once I got the salary offer, I did detailed research and crafted an excellent argument as to why I deserved a $2,000 increase in the salary that was offered to me. After presenting my argument, the recruiter was impressed, but told me they don’t negotiate salary at this company, so that all employees are on the same playing field and get the same compensation for the exact same job. I figured that seemed fair, knowing that whenever I moved up, I’d be getting whatever pay scale was offered for that position at the time.

Fast forward one year, and I’m now in an excellent position to be promoted. The promotion is two pay grades over my current one (I’m guessing about a 25% bump), so that excites me. However, imagine my surprise when the same recruiter tells me that for internal employees that are promoted, company policy dictates that I can only receive a 10% bump from my current salary. This confuses me, as I would be making quite less than any employee working the same position that would be brought in from the outside.

I expect an offer in the coming days. What do you thing and what steps do you recommend? All I want is the listed pay grade for the position. And even though the pay grade is a 25% bump, we’re not talking a huge amount of money, as my compensation was on the low end to begin with.

Yep, this isn’t unheard of, although it’s really, really stupid. What better way to encourage your best employees — the ones who are moving up — to leave the company so that they can be paid the market rate for their work?

All you can do is argue the logic of your case. Point out that all you want is the listed pay grade for the position, and point out that if you left and applied for the position a week later (or applied to do the same work somewhere else), you’d be eligible for a higher salary. Do they want employees to leave in order to get paid fairly?  You might also point out how unfair and absurd it is to penalize you for bringing the advantage of already knowing the organization and how it works, unlike a candidate they hired off the street.

But ultimately this is going to come down to how rigid and inflexible their policy is, and whether there’s anyone there with common sense and the assertiveness to go to bat for you. And maybe also to how much they want you in the new position. Good luck — and remember that if they won’t budge, you have the option of going somewhere that will pay you fairly. (It wouldn’t hurt for them to pick up on that in your stance either, as long as you do it professionally.)

{ 34 comments… read them below }

  1. Anonymous

    My company has the same policy, but there are means to get exceptions where the situation calls for it. I would do what AAM says, but consider that the bottom line may be that your company doesn’t feel like your work is worth 25% more and then you need to make a decision about whether that’s accurate or whether it’s time to move on. I will also say that make sure you know your looking at the right things in making your judgement. Just because a position has a different pay range (grade) doesn’t mean that it has a different level or that the level is actually 2 up from where you currently are. Be sure your understanding the entire picture.

    1. Mike C.

      If the employee being promoted isn’t worth the 25% bump in pay, then why are they promoting that employee rather than hiring from outside where the full salary would be paid?

  2. Josh S

    The company already has a strike against it because they plainly lied. If “all employees are on the same playing field and get the same compensation for the exact same job,” then it shouldn’t matter if you are promoted from within or hired externally, right?

    I suppose there’s a possibility that the OP misheard or misunderstood the HR rep during that initial negotiation, but I kind of doubt it. $2k in salary negotiation isn’t a huge thing, so hearing a flat ‘no’ because of a strict policy of pay equality seems to be something that would be hard to misunderstand.

    So the only response left to hear is, “Well, yeah, we told you that all employees get paid the same based purely on position/title, but we didn’t really mean it.” And now it’s left to the OP to decide what other things the company “doesn’t really mean.” And that’s just lousy.

  3. anon-2

    Most companies have an “off budget slush fund” to handle these situations — but, unfortunately, it often takes a move of brinkmanship to get management to sit down, eat humble pie, and call to tap that.

    1. Original Poster

      Yes, the recruiter did mention that some hiring managers are “more flexible” with this (giving more than the standard 10%) but to be prepared in case mine isn’t.

  4. Anonymous

    I worked for a company that had the same policy. a max of 10% increase for internal promotions, but alot more coming from the outside. Project Managers made about 50K, and the next step up was a Unit Manager. A promoted PM would make about 55K for the Unit Manager, but bringing someone in from the outside? 75K. This is a huge reason why the turnover rate at this place was through the roof! Even in a bad economy!

  5. Jay S

    This happens all the time. Your best bet is to: 1.) find another job offer 2.) use the logic in the comments above to state your case to your current employer. 3.) if the employer doesn’t budge, use your other job offer to negotiate.

    The negotiation process can go both ways in my experience. A good manager can get you what you deserve.

    It may sound a little ruthless but its the companies problem; they should want to retain good talent.

  6. Anon

    We had a policy like that. It was a sort of probation: try the promoted guy out for a few months and if anything went wrong, he could be quietly moved back to his old slot or its equivalent and be paid fairly close to his worth. Compare that the the guy from outside who gets the whole promised salary, but when he fails to work out, he gets fired altogether. It’s not a bad deal if there is (as we had) a policy for rating performance and boosting salary to the specified level within a reasonable amount of time. Does the OP have such a promise: raises to bring the salary within the stated band for the job within a specified time period?

    1. ITforMe

      This is what I was wondering. I worked somewhere that was like “we can only give you 10% for the promotion, and then you’ll get a bonus 5% at annual raise time in a two months”. It was really dumb, but I got the promised bump, so, whatever.

    2. Mike C.

      Lots of companies make this promise and then never deliver. I would never take a deal like this without it being in writing.

        1. Sam

          It takes it from being a “he-said, she-said” situation to something where there’s proof of what has been promised. Of course, there’s nothing to stop your boss from saying “you either take the salary/raise we’re offering, or your fired”, but at least you’ve got a little bit more ammunition/negotiating power.

        2. Ask a Manager Post author

          Most employers aren’t looking to deliberately screw people. Having it in writing is helpful in case the person you had the conversation with leaves the company, or there’s a miscommunication, or someone forgets what was agreed to. Also, if the company balks at putting it writing, that can surface that fact that it’s not an absolute promise but rather a “maybe this will happen,” which is valuable to know.

    3. Original Poster

      I haven’t gotten such a promise, but we haven’t gotten to that stage just yet. However, there was a complete freeze on merit based raises until the beginning of this year.

  7. Jeanne

    My company did exactly this. You had to leave and come back to be paid fairly. Almost all the best talent left. Some companies are stupid. Penny wise, pound foolish.

  8. EngineerGirl

    If the promotion is 2 steps up, it may end up being a stretch assignment. So they are giving you a chance at a job that you wouldn’t have qualified for if you came in from outside. If that is the case, it is reasonable to pay you a lower rate now (because they are taking a chance on a double promotion) and then giving you the bump to a full salary once you’ve demonstrated performance in that role. If that is the case I would negotiate for a review at X months out, with a commenserate salary bump if your performance is competent. Get it in writing though – HR seems to have a notoriously short memory on promises like this.

    1. Sam

      That’s exactly what I was thinking – the OP says she’s been working there for only 12 months. To me, that suggests the company is taking a bit of a risk in the promotion, with the hope + expectation she’ll be able to grow into the role (and hence, the salary will start out smaller than usual, but will be raised as the OP grows into it). It’d definitely be a good idea to find out if this is the case, and as you say to get any future raise commitments in writing.

      However, that doesn’t excuse the fact that, at best, the company is being unclear in it’s communication with the OP. At worst, they have outright lied to her. Either way, it would raise a red flag with me and I’d want to find exactly what was going on and what it would mean for me before committing to anything further.

    2. Steve G

      I once got promoted to a job that pays $25-35K more per year than I was making. I got $5K instantly, but $14K after four or five months. I was then the lowest paid in that job but it was alot of money to me at that age, etc, so I was very happy. But I don’t think anything warranted a $19K/yr jump as soon as the promotion started (and I wasn’t even doing the job full throttle, still in training phase).

    3. Original Poster

      To clarify, it’s not a stretch assignment, as I came in a level below what I usually would, as I had recently found myself suddenly unemployed and this job came along w/in weeks of my leaving my prior job.

      Also to note, everyone who has been promoted in the last two years have gone two or three pay grades up (on paper) from their previous postition. Whether or not they got the listed pay rate, I don’t know.

  9. Phideaux

    My company has an equally arcane method of determining pay raises, promotion increases, and starting pay.The HR manager “subscribes” to a service that calculates salary based on…well…I’m not really sure what it’s based on. It’s not reality, that’s for sure. She will plug in the job title and ZIP code, and it spits out what they think are typical duties for that position and a pay range according to the ZIP code. Because we’re in a rural area the Salary Calculator deems us a low wage area, and that reflects on the numbers they give. We then start everyone at the very bottom of the scale with a cap increase of 4% a year. Then, what the company determines what it spends per employee on benefits (which, I must admit, are pretty good), adds that to what they pay you, and you’ve got your annual salary. Of course when the benefits are added in, you’re close to the top of the scale, so as a result we have a lot of people who haven’t been there too long, doing great work, and are topped out salary wise.

    Other than that, it’s a great place to work

    1. EngineerGirl

      Sound like your HR person is using the tool incorrectly. It’s fine if the tool factors in the benefits at the other places too – that would be total compensation. However, if the HR person is using pay only for the comp rate, and pay+benefits for your company that would be an apples to oranges thing.

      It might be worth asking if that is what she is doing, then asking that it be corrected if that is the case. Otherwise the company risks losing good people.

      I’ve seen the rural salary equation used before – because the company is the only game in town. It becomes more and more of a problem as roads are built (can commute to larger towns) and also as people go virtual in their jobs. I’ve also seen it misused before – the company was itself in a rural area, but was only 15 or so miles from a major metropolitan area. So it is competing with that area, like it or not. Usually when that is the case the company promotes its lifestyle – lower cost of living, better schools, good place for families, etc. as compensation for the lower salaries.

  10. K.T.

    Does the salary increase also apply to internal transfers rather than promotions?

    I have always wondered about this. My company has a reputatation for hiring internal candidates for different positions. I work as a QA I, but there is another QA I position open in another team in my same department. I only want to apply if there is a chance that I could get a salary increase since I would be transferring, however, I’m worried they will say no because it is the same job title.

    1. Ask a Manager Post author

      If it’s the same level of position at the same level of responsibility, there probably isn’t a raise associated with it. You’d need to justify the reason for why you’d deserve more money.

  11. SC in SC

    As much as I’d like to commiserate with the OP and others posting about only receiving a 10% raise with a promotion, I’d more than welcome that type of increase. Admittedly, I can’t complain about my compensation but promotional increases in my company typically run 6% max and even that is not guaranteed. As an example, I was recently promoted from a manager’s role to Director taking on responsibility for three groups in the US and Europe. The promotion was part of a merger and restructuring so there were a series of promotions into new roles. Care to guess what my increase was? That’s right….zero. No discussion. No negotiation. Nothing more than a “sorry the merger was too costly and we need to pay down the debt”. And although it was disappointing to not get a raise, I still love my new role and would have pursued it even if I’d known I wouldn’t be receiving one. Personally, I rarely think about compensation and it’s certainly has little to no impact on my satisfaction level at work. I’m all for trying to negotiate as much money as possible but don’t let it sour you on what might be a great opportunity.

  12. Harry

    Similar policy at my company which is a top employer (in terms of number of employees) at a European country. No matter what the position salary range is, you only get a certain % from your old position even though you qualify. However, if someone outside comes, they have much more leeway in obtaining a salary within that range. It certainly encourages employees to leave and many have done so.

    1. Original Poster

      Based on the comments, it’s sad to see this practice is more common than I thought. :-(

      Thanks to Alison for answering my question and thanks to everyone who commented! If I get the offer, I’ll be sure to update everyone.

  13. ChemMan

    My experience with this type of hard cap is that it was initially put in place to “control” how much of a raise any one person received. At some point in history, one or more people received a multigrade promotion and were given the salary of the new position. This often happens because the regular developmental pipeline is empty but the upper position needs to be filled. Once this happens more than a couple of times, someone in HR gets wind of it and says, “What are we doing giving people such a large raise?” Instead of fixing the issue (poor developmental process) they slap a hard cap on the maximum raise allowed and then claim it as a cost savings for the company. A very short sighted action for all the other reasons people have mentioned.

    1. Ed

      I understand how multigrade promotions could set off red flags in regards to pay but I even think that is dumb. If I’m a supervisor and get promoted straight to director because there are no qualified managers, why should I not get full director pay? Although even worse in this situation is when they give you a manager title but still assign you director responsibilities because that is what they need. “Sorry, we can’t jump you from supervisor to director”.

  14. Sandy

    We had a policy similar to this at my last job, except it was only 5% regardless of the type of promotion/transfer. People were transferred from entry level (MailRoom Clerk) to much higher level positions (Business Analyst) and only received a 5% raise. Of course, it wasn’t used consistently, but we were told it was the policy. As a Recruiter at that company, I had to tell internal candidates about their 5% raise and it was very embrassing, I didn’t want to do it.
    When I was promoted at that company, I had brought salary data for our area and was prepared to negotiate with the factual information, but they didn’t budge. I took the job for a year and left for a 20% raise (other people were leaving and getting upwards of 50% raises for the same type of job).

  15. This just happened to me.

    I work for a state university and just got a promotion. Come to find out that they are paying me the minimum in the range to the dollar. Four other people accepted the job at increases that put them approximately 15 percent higher for the EXACT same job. I tried negotiating with three different administrators and no dice. This is all because I was lowballed when I came here. It’s so demoralizing…. I had to jump through hoops to get this stupid job and they nickel and dimed me. The worst part was that they could have gone to a higher authority to get me more but no one was willing to go to bat for me. Even 1k would have made me feel better because they would have done SOMETHING, you know?

    It’s bs, and these places need to realize that when they treat employees this way, they are only promoting turnover. Now I understand why so many people who work here are lazy and don’t bother doing even simple parts of their jobs.

  16. Ed

    I wish more companies would have a strict, published pay scale for all positions. Here is the range, you start at the very bottom and then get bumped up for years of related experience, eduction, certifications, etc. And of course, it would apply evenly to internal and external candidates. I would assume it does work this way at large institutions like universities or hospital systems.

    It does seem crazy that your reimbursement for your entire career could be determined by how well you negotiate your starting salary. Based on how many companies are so concerned with your previous salaries when hiring, I would think this happens a lot. A job should simply pay whatever the job pays, regardless of any external factors.

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