Promotions that are instituted without any pay raise might raise compliance questions, even if they were made with the intent of boosting morale.
Even without a pay raise, a promotion might result in a new title and enhance a worker’s status in the workplace. But George Lopez, an attorney with Tripp Scott in Ft. Lauderdale, Fla., cautioned that employers need to ensure that there isn’t a discriminatory pattern with promotions without raises. “Employees may look at co-workers and say ‘when you gave a promotion to white managers, you gave raises,’ ” he remarked.

Any time raise-less promotions are made, the employer is establishing precedent, Lopez said. It is important when employers make a compensation decision of this kind that they are consistent with their message, he added. The rationale for promotions without raises might be that the company is cash strapped, the employer has lost major accounts or the industry is in a major slowdown, for example.

The employer should note whether the flat compensation is a temporary measure, such as when there is a one-year moratorium on raises. Another consideration for employers that should be planned for is whether there will be retroactive reimbursement of the raises that ordinarily would have accompanied the promotion.

Be clear about why the promotion does not include a raise and for how long it will be without a raise, he recommended. Be cognizant of the demographics of the people who are receiving promotions without raises, he said, noting that employees who receive raise-less promotions might argue that they have been discriminated against based on a prohibited factor such as sex, creed, race, color, national origin, age or disability.

To defend themselves from such claims, employers should be very fact-specific about the reason a promotion does not include a raise.