Question: Hi! I’m the owner of a small business in Riyadh. I would like to promote some of my top performers this year but don’t have the budget for an annual raise. Can I discuss the possibility of promoting a deserving employee but not increasing their salary due to current economic conditions? How do I handle the situation without losing my employees to competitors? Mohammed A.
Answer: Hello Mohammed. This is a question I’ve heard several times in the past months. Typically a promotion and a monetary increase go hand in glove, but there may be times when this is not possible due to budget constraints. One of the ways some business owners are tackling this dilemma is similar to the path you are considering, i.e. promoting key employees, but not giving them the associated raises. There is certainly nothing illegal or inappropriate about this practice. In fact, “title-only” promotions seem to be growing during uncertain economic times.
If this is the first time you are considering to implement the practice of a “title-only” promotion, then there are a few issues to consider.
1. Give your employees a reason
Open and honest communication is the key. It is important for you to clearly communicate why no raises are being given. It could be the economic downturn, or specific issues in your company that have caused a slowdown, such as losing a key contract or customer, etc. Being clear and transparent about your decision is good business practice; it shows you as an ethical person and puts you in a good light. In the Middle East, three quarters of companies (76%) have ethics and integrity, according to a Bayt.com poll on
values, ethics and integrity, and you should follow suit.
2. Look at the bright side
As much as it is about the money, a promotion also comes with more responsibilities, learning, and management power as being promoted often means moving into a supervisory or management position. Also linked to promotion is decision making. When an employee is in control, they can better affect the outcome of important decisions within the company. Again, while a raise might seem to rank ahead of increased decision making abilities and other non-financial perks, those benefits are all things worth emphasizing.
3. Offer bonuses
If possible, and until you can afford a monthly raise, offer your employees a quarterly or annual bonus based on their work performance. This bonus could be a percentage of the total profits; it could be treated as a substitute for a monthly raise and could even incentivize employees to work harder.
4. Re-evaluate current salaries
If your current salaries are below the market rate, you should consider raising the wages to at least the current rate. An employee who is being underpaid might feel under-appreciated, and giving a promotion without raise would only add salt to the wound. You do not want a loyal employee to leave over monetary compensation. You can use the
Bayt.com Salaries platform to compare salaries and check what the average salaries are for each position.
5. Offer other benefits apart from the salary
If you cannot offer a raise, consider other benefits that would make a substantial difference to the employee; like opportunities for training and development, flexi hours, telecommuting options, more vacation days, etc. According to a Bayt.com poll on work-life balance, 43% of professionals in the Middle East claim that they do not have a good
work-life balance. Benefits like these act as positive reinforcements.
