25. June 2024

Why is everyone talking about… the promotion recession?

Personio Pulse: This Week in HR - 2

Welcome to Personio Pulse: This Week in HR, where each week we take a look at the latest trends in the world of work, what you need to know about them and what they mean for you as an HR professional. 

This week we’re talking about the potential ‘promotion recession’ that’s on the horizon and what your HR team can do about it.

What you need to know

Have you heard that we might be in a ‘promotion recession’? The latest data from Bloomberg found a 1.3% promotion rate in the first quarter of 2024 (amongst 68 million workers in the United States). For context, that’s the lowest rate in five years.

If we look a bit more locally, the Office for National Statistics reported the average promotion rate between 2003 to 2017 sat at around 19.58% on average. If the trends in the UK come close to the 1.3% rate in the US, that would be a stark drop-off for promotions across the board.

What others are saying about it 

Employee growth and promotion has a distinct effect on overall business success. Especially in times when employee confidence is already in short supply, fewer promotions may mean lower motivation, less productivity and poorer business performance. 

“In the last four years, the white-collar workforce has faced the pandemic, the Great Resignation (everyone is quitting), the Great Termination (everyone is being laid off), the ‘Great Stay’ (no one is changing jobs), and now... the ‘Great Standoff’,” says Jason Salt, Director of Growth at Live Data Technologies.

What that means for you

Ultimately, the promotion recession points to a tightening labour market where development and career growth are more important than ever — but are in increasingly short supply. Organisations have a key role to play here and should begin by expanding the conversation on employee growth. 

Our own research has found that 52% of employees in the UK would appreciate more transparency around promotion timelines. This doesn’t mean that organisations need to promote people en masse, but it does mean they can benefit from being more transparent about it. 

To counteract the potentially worrying effects of a promotion recession, we’d suggest that organisations consider the following: 

  • Clear levelling frameworks: What does it take to get from one stage to the next? Levelling frameworks can ensure that you’re clear with your employees about how to get promoted. 

  • More feedback mechanism: Growth comes in all shapes and sizes, and embedding a culture of continuous feedback can help employees understand what great performance looks like and how it can help them take the next step. 

  • Expand the definition: If promotions are harder to come by, think about how other benefits (bonuses, mentorship programmes) can help engagement.

What else should I read? 

That's all for this week's edition of Personio Pulse: This Week in HR. Check back next week as we continue to dissect the latest trends impacting the ways we work. 

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Max Specht

Max Specht

Max Specht is a Workplace Trends Expert at Personio. He enjoys writing and discussing topics related to employee engagement, leadership development, HR technologies and how teams can respond to the latest trends.

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