Teacher promotion is an important issue in school administration that deserves more academic attention. In business management a commonly used tool for employee motivation, aside from promotion, is the compensation system, which can be flexibly and frequently adjusted with the performance of individual staff members. However, in the existing education system, pay levels and structure are relatively fixed and it is difficult for principals to use the compensation system as a tool to motivate teachers. Promotion is therefore the most important reward that principals can use. Using Hong Kong as an example, and with a sample of 210 principals and teachers from both primary and secondary schools, this article attempts to find answers and make suggestions to improve the current promotion system. It is hoped that this study will provide a better understanding of teacher promotion in general, and in Hong Kong in particular. (Contains 9 tables.)