The placement of an old employee in a higher post with more monetary benefits and greater responsibility is termed as promotion. The ambition of each and every employee is to get promoted and deprived of such promotion loses the interest of the employees in work. Sometimes some firms go for outside recruitment instead of promotion.

Revert of an employee from his present post is called demotion. Degradation or shifting of an employee to a lower post is called demotion. It is a type of punishment to the workers. Demotion is made because of technical disqualification, breaking of rules and regulations and incompetence.