In a nutshell, there's one budget for annual salary increases, and another budget for pay increases that result from promotions and competitive counter-offers.

In a nutshell, there's one budget for annual salary increases, and another budget for pay increases that result from promotions and competitive counter-offers. These budgets may be controlled by different people. Companies that have a lot of money, tend to manage that money by dividing it up into different "pots" that are controlled by individual managers. This is just a straightforward way of managing a business, but what's not obvious at first glance is that moving money from one pot to another is hard. If a higher power has decided that the merit increase budget is 2%/y, that could be hard for an individual manager to budge. On the other hand, if you promote someone, you get the full 2% of your new budget in the next annual cycle, so your salary budget has increased by more than 2% for that year. Another thing is that if you bump a junior up to senior, and that person leaves, nobody will bat an eye at replacing them with another senior. What I did as an IC was that I articulated my interests to my boss in fairly plain terms. I asked: What's the process for moving up a level? What do I need to do? What goals can we put on my performance review? A lot of people are timid about this, especially as the answer might be No. One of my friends was told by his boss: "You are topped out at your level." Ouch. What I can't tell anybody is what risk they're taking by adopting any particular approach. I don't think I engaged in any skullduggery or politics. I am in fact enthusiastic about the business, and committed to improving my own knowledge and work. Something I've told my bosses, which is completely sincere, is that I have a lot of mental flexibility, and am happy to be guided by what they think is the best for their department and the business. It might be that my experience as a manager gave me some cred, since it was clear that I understood the process from both sides of the table.