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October 28, 2011

HT: Promoting Employees Without Increasing Pay

What risks do small business owners run when promoting employees but not giving them raises? L.C., La Canada, Calif.

Such a practice likely lowers morale and engenders resentment among employees who are asked to do more, or to take on more responsibility, for the same pay. You could also run into legal trouble if you’re promoting someone with no pay raise and they’re moving from an hourly positionwhere they are entitled to overtime payto a supervisory or management level where they get an annual salary. In most companies, a move up the ladder into management includes a pay raise, both to compensate for the added responsibility and to make up for the loss of overtime that might have been incurred when the employee clocked on and off the job.

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