Mercer Projects 3.6% Total Salary Increase Budgets in 2025
Workspan Daily
October 09, 2024

U.S employers are budgeting for 3.3% merit increases and 3.6% total salary increases for non-unionized employees in 2025, according to Mercer’s August 2024 QuickPulse U.S. Compensation Planning Survey.

The survey asked more than 1,100 U.S. employers to share their preliminary budget projections for 2025. Mercer data showed the current projected total salary increase for next year matches the actual pay increases organizations delivered in March 2024. The firm, however, predicted actual increase budgets for 2025 will be lower, continuing a recent downward trend.  


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“As budgets are finalized, we may see a decrease in merit spending as well as off-cycle salary adjustments in response to the decreased pressure of attracting and retaining talent,” said Jack Jones, a principal at Mercer. 

This is the fifth large-scale salary budget survey to be released recently. Previous reports and 2025 projections included: 

“Salary increases are strongly influenced by labor supply and demand,” said Alicia Scott-Wears, a compensation content director at WorldatWork. “Hiring appears to be slowing, making the job market increasingly competitive among job seekers.” 

Scott-Wears also noted the U.S. Department of Labor’s Bureau of Labor Statistics reported on Sept. 20 that the national unemployment rate remained relatively unchanged over the past month but was 0.4 percentage points higher than in August 2023. 

“These indicators suggest that employers may continue to reduce salary increase budgets incrementally,” she said. “This aligns with participant predictions for 2025 from WorldatWork’s Salary Budget Survey, released in July, as well as Mercer’s projection that this downward trend will persist.” 

WorldatWork will reassess labor fluctuations following the November general elections and provide a fall update to its Salary Budget Survey.


Click here to access top-level results from WorldatWork’s 2024-2025 report. In addition, the full report — covering base salary increases and merit budgets for 22 countries and in-depth salary budget insights for the U.S., Canada, India and the United Kingdom — is available for purchase. Report purchase also provides access to the U.S./Canada Online Reporting Tool to build customized reports based on industry, organization size and/or geographic area.


Salary Increase Budget Reductions Expected 

In addition to decreased pressure to attract and retain talent, an uncertain economic outlook is an additional major factor driving this year’s salary increase budgets, said Jones. 

Talent demand continues to outpace supply, but the gap has narrowed compared to pre-pandemic levels in 2019. 

“In 2022 and 2023, the labor gap between job openings [demand] and unemployment [supply] was immense,” Jones said. “This heightened demand for workers resulted in companies offering more aggressive compensation packages to attract and retain talent.” 

Coupled with low unemployment rates and layoffs, all indicators are that the labor market is healthy, he said, adding concerns arising from slowing job gains and unpredictability of election outcomes will leave employers questioning whether the labor market is cooling. 

“Mixed economic signals and prevailing uncertainty in the labor market are both weighing on companies' hiring and compensation decisions,” Jones said. “Many employers are now bracing for impact with a frugal approach to all strategic financial planning.” 

In 2024, actual salary increase budgets came in about 0.2% to 0.3% lower than original projections, Jones said. The 2025 salary increases (expected to take effect in the first quarter) are likely to follow a similar pattern. 

“Employers will need to find ways to do more with less,” Jones said. “It’s important to re-evaluate merit processes and embrace insights from data-driven approaches to make informed decisions, as the traditional 3% across-the-board merit budgets will no longer cut it.”  

Other highlights from the Mercer report include:

  • Survey respondents within the high tech and life sciences industry sectors project merit-based salary budget increases of 3.5%, above the 3.3% average, while the healthcare services, retail and wholesale, and consumer goods sectors project lower-than-average increases of 3%, 3.1% and 3.2%, respectively.
  • Employers overall are planning to promote 10% of employees, up slightly from the 8% they predicted promoting in 2024. The average promotional increase budget for 2025 is 1.0%, slightly down from 1.1% in 2024.   

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