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alexandrafeig
- February 27, 2025
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Merit increases aren’t the only thing on people’s minds this time of year. The next big topic? Promotions—and the salary increases that come with them.
While merit raises are designed to keep salaries competitive, reward strong performance, and sometimes keep up with cost-of-living adjustments, they’re typically modest—usually in the 2–5% range. Promotions, on the other hand, come with a title change and a more significant pay bump. A promotion raise typically starts at 8–10% at a minimum, and for higher-level roles, it can be 15% or even 20%. That’s because a promotion isn’t just about recognizing past performance—it’s about adjusting pay to match a new level of responsibility.
So how does this all work? Like merit increases, promotions are tied to a budget. Larger and more established companies usually allocate separate pools of money—one for merit increases and one for promotions. Some organizations combine them into a single pool, but in my experience, they’re usually distinct. And while most managers have enough in their merit pool to give everyone something, promotional pools are much tighter.
In a typical cycle, a promotional budget is often structured to support one person getting a strong promotional raise—somewhere in the 10–15% range. Alternatively, a manager might have enough flexibility to give two employees a smaller promotional increase, something closer to 7.5–8%. That means that not everyone who deserves a promotion will necessarily get one right away. Timing, budget, and team priorities all play a role in deciding who moves up when.
One of the biggest misconceptions about promotions is that they stack with merit increases. Most of the time, they don’t. If someone was recently promoted—typically within the last three to four months—they usually won’t be eligible for a merit increase in the same cycle. Their raise already accounted for a salary adjustment. Likewise, most companies structure their timelines so that promotions happen before merit increases are awarded. That way, an employee gets a promotional raise, but not a merit increase in addition. It’s a way to balance budgets and ensure fairness across teams.
So how exactly is a promotional increase determined? First, a manager has to work within their promotional pool—which means they can’t just bump someone’s salary to any number they choose. Second, most larger companies use salary bands as a guideline. If you’re being promoted, you’re likely already at the top of your current band (meaning you’ve maxed out what merit increases can do) or you’re already performing at the next level and it’s time to make it official. When setting a new salary, a good manager—often working with an HR business partner—will try to place the promoted employee somewhere within the first third of the new salary band.
Where exactly someone lands in that range depends on a few factors: how close they were to maxing out their old band, how competitive their pay is compared to the market, and how strong their performance has been at the next level. Someone who has already been taking on higher-level work might get a larger increase to position them appropriately. Someone who’s newly stepping into a role might get a more conservative bump with the understanding that there’s more room for future increases.
Promotions, like merit increases, are a balancing act between rewarding talent and staying within budget. And while they’re exciting, they’re also highly strategic—timing, budget, and salary bands all come into play when deciding who moves up and how much they get paid.
In the next post, we’ll tackle one of the biggest frustrations employees face—why people tend to get bigger raises by switching companies than by staying put. Let’s break down why that happens and whether jumping ship is always the best move.
