In traditional compensation programs, a promotion results in an automatic pay increase. This uniform approach can be problematic for several reasons.

• Not all promotions are of equal value.
• Automatically increasing an existing pay level may simply perpetuate the trend of an employee’s pay history, which may not reflect the value the employee currently brings to the employer.
• There may have been circumstances in the past that resulted in either over- or underpaying the employee which the promotion is an opportunity to correct.
• An automatic increase policy prevents managers from tailoring the increase to the circumstances of the promotion.

A better approach is to determine the appropriate pay for an employee based on performance demonstrated in the previous job, which indicates the capability to handle the new job, rather than focusing on current pay. The pay level within the new benchmark base pay range would be determined using guidelines on page 6 and considering internal equity and budget constraints. The adjustment, therefore, would be the difference between the old and new pay guidelines.