When employees see little room for pay growth, talent retention suffers. Pay is consistently near the top of the list of reasons people leave organisations. Put simply, when employees feel their prospects of pay progression are limited or unclear, engagement drops and attrition rises.
Yet pay progression is one of the most powerful levers employers have to maximise the return on their reward investment and keep key people motivated for longer.
By refocusing pay progression through a clear framework, robust market insight and well-defined career pathways, organisations can strengthen retention while improving fairness, transparency and performance.
The challenges holding pay progression back
Every HR leader wants to accelerate pay for strong contributors. In practice, competing priorities and finite budgets make this difficult. Most pay review spend is absorbed by keeping pace with the external market, particularly for scarce or fast-moving roles.
Across our work with clients, three challenges consistently undermine effective pay progression.
1. Budget constraints
Many organisations have performance frameworks in place, but only allocate 0.5 percent or less to differentiate good from exceptional performance. This level of funding rarely supports meaningful movement through a pay range.
Using Advance, Innecto’s pay review and modelling solution, organisations can test different budget scenarios and see how reward spend can be targeted to maximise impact, rather than being spread too thinly to make a difference.
2. Weak or inconsistent frameworks
Without a robust pay and job architecture, managers struggle to make fair and consistent decisions. This erodes trust and leaves employees unclear on how pay decisions are made.
Innecto’s Reward Consultancy services help organisations design clear, defensible reward frameworks aligned to business strategy. This is underpinned by Evaluate, our job evaluation methodology, which ensures roles are sized consistently and progression is based on role value, not individual negotiation.
3. Limited modelling capability
Even when organisations know what they want to change, many lack the resource or tools to model the impact of pay progression decisions over time.
Through Advance and PayLab, Innecto enables organisations to model pay progression against internal structures and external benchmarks, giving HR leaders confidence in both affordability and competitiveness.
At our Pay Trends event in 2025, over half of organisations admitted they had no formal pay progression mechanism in place at all. While many had pay ranges, employees often had little understanding of how those ranges were used or how they could progress within them.
Asking the right questions about pay progression
To move towards a more balanced approach that blends market alignment with recognition of performance and capability, organisations need to step back and challenge their core pay principles.
Key questions include:
- What do we want to incentivise and reward?
- How does pay progress within our organisation and can individuals influence it?
- Is there a clear performance or competence element with regular review?
- How do we define an individual’s ongoing value?
- How much responsibility do we place on line managers and are they equipped to deliver?
- Do we need external expertise to drive change at pace?
- How do we communicate our approach clearly and consistently?
- How do new joiners understand their future pay and career path from day one?
This is where Pathfinder, Innecto’s career pathways solution, plays a critical role. Clear pathways link roles, skills, pay and progression together, helping employees understand not just where they are today, but what growth looks like tomorrow.
Maximising employee lifetime value
Replacing an employee can cost between £14,000 and £50,000 depending on sector and seniority. Retention is not just a people issue, it is a commercial one.
Employee lifetime value helps frame this challenge.
The starting blocks
During recruitment and onboarding, employees consume resources while they get up to speed. Output is negative in this phase.
Hitting pace
Once fully competent, employees generate the strongest return. This is where reward, development and progression matter most.
Losing momentum
Once an employee decides to leave, productivity declines until it reaches zero on their last day.
One not-for-profit client discovered their fundraisers delivered the highest value after two years, once they had built experience and relationships. However, many were leaving before reaching this peak due to stronger pay progression elsewhere. By redesigning pay progression using market data from PayLab, the organisation extended average tenure by just one year. The result was a significant uplift in return on investment and revenue.
Extending and strengthening the lifecycle
To maximise employee lifetime value, organisations should focus on four areas:
- Getting employees up to speed faster through streamlined recruitment and onboarding
- Increasing how far individuals can progress within the organisation
- Keeping employees at peak contribution for longer
- Maintaining engagement and motivation, even when people choose to move on
When these elements are aligned through clear reward frameworks, robust job evaluation, market-informed benchmarking, effective pay reviews and visible career pathways, organisations see stronger retention, higher productivity and greater trust.
Pay progression as a strategic advantage
When employees understand what they need to do to grow their pay and their career, it transforms the employee experience. Transparency builds trust. Fairness drives engagement. Clarity motivates people to stay and contribute at their best.
Pay progression is not just a technical reward exercise. Done well, it is a strategic tool that protects investment in people and supports long-term organisational performance.
