The conventional wisdom says you should change jobs every 2–3 years to maximise earnings. But a promotion at your current employer comes with benefits that a new job cannot replicate. This guide helps you compare the two options financially.
The typical pay bump
- Internal promotion: typically 5–15% salary increase
- New employer: typically 15–30% (market rate adjustment)
The headline difference looks significant — but it does not tell the full story once you factor in what you lose and gain.
What you keep with a promotion
- Pension tenure: some schemes increase employer contributions with service
- Annual leave accrual: longer service often means more days
- Redundancy entitlement: based on years of service
- Share vestings: unvested equity is typically forfeited when you leave
- Bonus cycle: joining mid-year may mean a partial or no first-year bonus
The tax impact of a bigger jump
A 20% raise from £45,000 to £54,000 crosses the higher rate threshold (£50,270). The excess £3,730 is taxed at 40% + 2% NI instead of 20% + 8%. Your monthly take-home increase is ~£480, not the £600 you might expect from a £9,000 gross raise.
An internal promotion from £45,000 to £49,000 (an 8.9% rise) stays entirely in the basic rate band. The full raise is taxed at 28% — a more efficient £240/month gain.
Hidden costs of switching
- Probation periods: typically 3–6 months with limited rights
- Pension gap: new employer contributions may not match immediately
- Loss of accumulated perks (healthcare excess waivers, enhanced leave)
- Commute change: new office may cost more to reach
- Risk: the new role may not work out
When switching is clearly better
Despite the hidden costs, switching wins when the pay gap is large enough to offset them — typically 20%+ — or when your current employer has no progression path available.
Compare the numbers
Run both scenarios through the income tax calculator to see the actual monthly take-home difference. Then factor in the non-salary items above. See also: Calculating the true value of a job offer.