For many employees, the prospect of greater responsibility, decision-making powers, new roles, and a higher salary inspire them to work hard and excel within a company.  Whether you have an employee who has worked incredibly hard to develop their skills over time or their role has taken on more duties,  recognising an employee by promoting them is one of the best parts of managing people – it’s a positive outcome for the employee and the business.

In this article, we explain what employee promotion is, the different ways to promote workers, and how to ensure you promote an employee compliantly.

Let’s begin!

Understanding employee promotions

Employee promotions refer to the rise of employees into higher positions or ranks. Promotion (also known as career advancements) is a process that enables an employee to take on more duties within a company. Increased salary, position, responsibilities, status and benefits often go hand-in-hand with this employment process.

The concept of promotion encourages employees to work hard within their roles to progress. However, it’s a good idea to consider both timing and reasoning when promoting an employee. If you promote an employee too soon, then they may become overwhelmed and lose the 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.

Four types of promotion

Promotions often require an employee to undertake greater responsibilities and duties in an expanded or new role.

An employee’s length of service, experience, seniority or performance, and even growth of the business are factors that can contribute to your promotion decision.

Broadly, there are four different ways to promote someone in a company.

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 receive a horizontal promotion to reflect this advancement; while their roles and responsibilities remain the same, their pay may increase to acknowledge this progression.

2. Vertical promotion

Vertical promotions refer to an upward progression of an employee who will further develop in their skills and experience. Promoting vertically often necessitates an increase in salary, responsibility, status, and benefits for the employee. Due to the nature of this type of advancement, an employee’s role may shift. These changes can facilitate a transfer between very different jobs.

3. Dry promotion

A dry promotion occurs when you charge an employee with greater responsibility within their role, without compensation to reflect this change. Under this type of promotion, you don’t offer a raise in pay or financial benefits; you only increase the employee’s status.

4. Open and closed promotions

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

Benefits of employee promotion

There are many business 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, they encourage employees to grow and develop with the company, thus increasing employee retention and loyalty.
  • They’re cost-effective: employee promotion is largely a cost-effective measure when you consider the price of onboarding a new employee compared to progressing an existing one into a new role.
  • 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 formalise an employee promotion

When you’re preparing to promote a successful employee, it’s important that you discuss this with them, and identify what their new role and responsibilities will be.

In this discussion, you can acknowledge the reasons why you selected the employee for advancement and highlight the value the company places on their skill set and contributions.

After the initial announcement of the employee’s progression, you’ll need to present the employee 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 a variation or new employment agreement. The agreement must be recorded in writing, signed, and agreed to between you as the employer and the employee.

There you have it; promotions are a rewarding employment process that can benefit both your business and your people. Generally, there are four typical ways to promote an employee: horizontally, vertically, dry or open/closed. Each approach brings a different set of financial implications, benefits and title changes.  For the best outcome, it’s always best to choose the type of promotion that suits the company’s and your employees’ unique situation.

If you need some advice on promoting the rising stars in your business, the team of workplace experts at HR Assured can help.

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