Moving employer usually pays more than being promoted internally, because an external offer is priced against the market while an internal promotion is calculated as an increase on what you already earn. The internal route has real advantages — lower risk, known environment, existing relationships — but on cash alone the external move wins often enough that treating them as equivalent is a mistake.
The mechanism that decides it
An internal promotion is usually calculated as a percentage increase on your current salary. An external offer is calculated against the market rate for the role.
Those are different starting points, and when your current salary sits below today’s market — which it usually does after a few years — the external route produces a larger number for the same work.
Why your salary drifts below the market
Employers refresh pay bands annually using survey data that describes a period a year back. So a band is structurally behind, and your position within it grows by a few percentage points a year.
Meanwhile new hires are priced at what it takes to hire them today. That is salary compression, and it is arithmetic rather than unfairness — two pricing mechanisms running at different speeds.
What the internal route actually offers
Known quantity, on both sides. You understand the organization, they understand you, and the probability of the role being a disaster is much lower than with an employer you have met four times.
It also compounds differently: internal moves are frequently faster after the first one, because a track record inside an organization is worth more than a resume outside it.
The costs of the external route that people underweight
The first year is expensive in ways that do not appear in the salary: no internal credit, no relationships, and no knowledge of where the real decisions get made.
Vesting is the other one. Unvested equity and employer retirement contributions are forfeited, and for somebody midway through a vesting schedule that can exceed the pay increase entirely.
Using an offer without leaving
An external offer repricing you internally is the highest-leverage version of this, and it is also the riskiest. Some employers match readily; others treat it as a signal you are leaving anyway and act accordingly.
The safer form is a market-adjustment conversation that uses published medians and advertised ranges rather than a competing offer. It makes the same argument with checkable evidence and without the implied threat.
Where internal genuinely wins
When the promotion crosses into a role that required years of experience as a precondition. Only 28 occupations require five or more years to enter and they are almost entirely management, with medians from $148,080 to $213,990.
Those roles are far easier to reach internally, because the employer can see the evidence directly. Reaching them from outside usually means already having held one, which is a chicken and egg the internal route solves.
The pattern that works over a decade
Alternate. Take an internal promotion when it crosses a genuine level, then reprice externally when internal progression flattens against your band.
People who only ever move externally accumulate no institutional standing; people who never do accumulate a compounding gap against the market. The mixed strategy beats both, and it is what the pay mechanisms above actually reward.
The numbers to check before deciding
Where you sit in the published percentile spread for your occupation in your metro. Where you sit in your employer’s band. What unvested equity or employer contributions you would forfeit. And what advertised ranges say the role pays right now.
Those four settle it more reliably than any feeling about loyalty. If you are low in the market and high in the band, external is the answer; if you are low in the band, the internal conversation is worth having first.
Common questions
Does changing employer really pay more?
On cash, usually. An external offer is priced against the market while an internal promotion is an increase on what you already earn, and those starting points diverge over time.
What does the internal route save?
Risk, principally. You know the organization and they know you, and a high proportion of failed external moves fail for reasons visible from inside and invisible from outside.
Should I use an external offer as leverage?
It sometimes works, and it changes how you are read afterwards — you become someone who is leaving, on a timescale the employer now controls. That can be an acceptable trade, but make it a decision.
What should I ask when promoted internally?
Not what the increase is, but what the band for the new level is and where in it this places you. If it is near the bottom there is room, and the person who can authorise more may not be the one offering.
What about equity I would forfeit?
Count it. Leaving before a vesting cliff forfeits real money that never appears in a salary comparison, and for some packages it exceeds the pay gap entirely.
Which pays more, internal promotion or external move?
Usually external, because an internal promotion is a percentage on your current salary while an external offer is priced against today's market rate.
What does the external route cost?
Unvested equity and employer retirement contributions, plus a first year with no internal credit or relationships — which can exceed the pay increase.
When does internal win?
When the promotion crosses into a role requiring years of experience as a precondition. Those are almost all management and far easier to reach from inside.