Promotion & Demotion in HRM

Promotion – It refers to upward movement of an employee from his current job position to another that is higher is pay, responsibility and hierarchy within an organization.

Promotion has an inbuilt motivational value i.e. it elevates the status and power of an employee within an organization.

Purpose of Promotion –

• To utilize the skills and knowledge of an employee at an appropriate level in the organization`s hierarchy
• To develop a competitive spirit among employees to acquire skills and abilities required for higher level jobs
• To develop competent workforce in order to create an effective organizational
• To promote self-development of employees and reduce labour turnover
• To boost confidence, loyalty and morale of the employee
• To Achieve Employee satisfaction by rewarding committed and hardworking employees

Types of Promotion –  

Horizontal  – It involves movement of employee form its current job position to another which is higher in pay and responsibility and designation, however the job classification remains the same.

Vertical  – It involves movement of employee form its current job position to another which is higher in pay, status, responsibility, designation and job classification.

Dry Promotion – It refers to an increase in responsibilities and status of the employee without any increase in pay or other financial benefits.

Open/Closed – When a company announces vacancies and opens the job position to all employees in an organization and all individuals within the organization have a chance of being selected for that job, it is an open promotion.  A closed promotion is when the organization does not announce any vacancies and the job position is not open to all employees of the organization.

 Basis of Promotion –

It is based on the merits of an employee and the seniority of the employee i.e. superior performance and length of service or both.

Demotion – It is the downward movement of an employee in an organization`s hierarchy with lower status and pay. It is a downgrading process where the employee suffers from emotional and financial loss in terms of rank, power, status, pay etc.

Causes of demotion –

• Promoted person is unable to successfully perform his new job
• Lay-off and downgrading due to adverse business conditions
• May be used as a Disciplinary tool

Types of Demotion –

Compulsory Demotion – It involves lowing of Job title, authority, status or salary of an employee as a disciplinary tool or due to adverse business condition by the organization. 

Voluntary Demotion – If an employee requests the organization to lower his work load so that he can manage his personal life, it is the case of voluntary demotion.