U.S. organizations are projecting 4.1% pay increase budgets in 2024 to remain competitive in the labor market.
That’s according to WorldatWork’s “2023-24 Salary Budget Survey” of 2,146 participating organizations. Notably, the research also revealed that 2023 salary increase budgets averaged 4.4%, significantly more than the 4.1% increases employers projected for 2023 in the previous year’s survey.
“It’s certainly noteworthy that projected budgets for 2023 were so far off from what actually happened,” said Sue Holloway, a compensation content director at WorldatWork. “This is something to keep in mind along with how tight the labor market remains as organizations plan their 2024 budgets.”
The survey found 2024 salary increase budget projections to be slightly higher than the 4% increases projected by 2,090 organizations in WTW’s survey and significantly higher than the 3.8% increases projected by 1,757 organizations in Payscale’s survey.
Merit and Other Increases
The WorldatWork survey found that organizations are planning merit increases that average 3.6% in 2024 with a 3.5% median. This is slightly below the 3.7% average that organizations provided in 2023 but matches 2023 projections from the previous year’s survey.
Additionally, organizations are preparing for an average of 1.8% general/cost of living adjustments (COLA) in 2024. This is down from the 2% general/COLA that was provided in 2023, which fell well below the 2.3% that organizations had projected from the year prior.
Broken out by employee type, organizations are projecting an average increase of:
- 4.1% for nonexempt hourly employees and nonexempt salaried employees.
- 4.1% for exempt salaried employees.
- 4% for officers and executives in 2024.
WorldatWork’s survey reported that 55% of organizations budget for promotional pay increases while 45% do not.
Of the organizations that do budget for promotional increases, the survey found that 40% have separate promotional increase budgets, while 34% include them as part of their “other” increase budget, 22% have them as part of their merit increase budget and 4% allot them as part of their general increase/COLA budget.
Of the organizations that do not include promotional increases in their salary increase budgets, 62% fund the promotional pay increases via vacancy, salary or other savings, 25% pull it out of the merit increase budget, 21% pull it out of the “other” increase budget and 6% pull it out of the general increase/COLA budget.
“Among the nearly half of organizations that don't budget for increases, promotional increases are most often funded with savings from vacancies,” said Liz Supinski, director of research and insights at WorldatWork. “Very large organizations often have this degree of slack in their budgets, but other organizations choose not to budget for promotional increases as a control measure, believing that some managers with a line-item in a budget might promote staff simply because their budget allows it rather than because the employee deserves it.”
Additional Key Findings:
- Layoff likelihood is predicted to be lower in 2024. Averaged across all 18 countries, about 70% of participants reported no layoffs for 2023, with 91% anticipating the same for 2024.
- Timing of pay increases. The average time between increases is at or slightly lower than the historical average of 12 months in all countries.
- United Kingdom salary increase budget growth. In 2023, the United Kingdom's average total salary increase budget exceeded projections, reaching 4.5% (4% median) compared to the projected 3.9%).
- The strength of India. India again shows the largest salary increase budget in the survey, averaging 9.8%. This figure, slightly lower than 2022's 10.1%, draws closer to the pre-pandemic level of 9.9%.
- Consistent growth in Mexico. Mexico has witnessed steady expansion of its salary increase budgets, progressing from 4.7% in 2021 and 5.7% in 2022, to 6.3% in 2023.
Editor’s Note: Additional Content
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