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No-raise promotions: A handy tool, but beware risks of ‘title fluffing’

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in Compensation and Benefits,Human Resources

Check out the signature lines on emails you receive. Are you seeing more “chief” this or “senior” that or “VP” of whatever?

Title inflation—or “uptitling” or “title fluffing”—has been around for a long time, but it traditionally picks up speed during recessions.

While salary budgets are up this year—merit raises are running near 3.0% compared with 2.7% in 2010—some still-skittish employers are more likely to dole out title raises rather than extra cash.

Your organization likely doesn’t take title-pumping to the extremes of, say, North Korea, where dictator Kim Jong Il has more than 1,000 titles, including “guardian deity of the planet.”

What’s the response from employees to no-raise promotions? It’s better than nothing.

More than half of employees surveyed by OfficeTeam (55%) said they’d be willing to accept a promotion that didn’t include a raise.  

5 questions to ask

The danger: Organizations may give gratuitous no-pay promotions instead of using the practice as a selective ­reward and retention strategy.

As a result, says John Skousen, a partner with the law firm of Fisher & Phillips in Irvine, Calif., “it can become confusing, disorganizing and difficult when striving to maintain job classifications and proper salaries when the economy bounces back—including dealing with inaccurate job descriptions with misleading duties requirements.”

Ask yourself the following questions to help determine how and when to offer promotions without pay.

1. Is the employee a key high-­performer who would be difficult and costly to replace? If so, it may be less expensive to raise the title, but promise a compensation review in six months.

2. Can you afford to offer other perks in lieu of pay? Instead of a title bump, consider offering more vacation time, bonuses, flexible work schedules and professional training. About 62% of employees wish they had more “hard” and “soft” skills, such as leadership abilities and knowledge of an industry, according to a Randstad survey.

3. How do salaries of the current and new positions compare? If the market salary of the current job is competitive with that of the new position, then a no-pay promotion may make sense.

4. Is it a real promotion? Don’t hand out titles unless they reflect actual responsibilities. Title “dilution” could prompt resentment and closet ridicule from other employees, especially those with “real” titles and responsibilities.

5. Do I understand the legal risks? Negligently promoting—assigning overblown titles along with duties that employees can’t perform—carries legal risks. Employers are responsible for the actions of workers who aren’t trained properly.

Plus, employers giving supervisory title changes may also assume they can shift a nonexempt employee to exempt status. If the actual job duties or responsibilities do not change much, you may face legal ramifications for misclassification and a potential lawsuit against the employer for unpaid overtime. (Check for true exemption status by using our Exempt vs. Nonexempt Checklist at www.theHRSpecialist.com/checklist.)

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