Yeah, this is a fairly common compromise, and even helps in the stupid cases where you can't give person A a job title higher than person B who will be mortified if they don't have the best sounding job title, but you still need to give person A a raise and a feeling of advancement (so glad I don't work at a place like this anymore). So you give them some variation on their current job title (it's not a promotion over you, person B!) and a raise, and call it a day.

It depends on how effectively bureaucratic the bureaucracy is. If all workers have to have a job title that's already in the database, and all job titles have an assigned salary, then you're out of luck.