Pay Increases Budgeted for 4% in 2024, Survey Finds
Workspan Daily
July 07, 2023
Key Takeaways

  • Pay raises remain high. WTW’s Salary Budget Planning Survey found employers are budgeting an average increase of 4% in 2024. 
  • Labor market challenges. The most common driver influencing changes in 2023 is a tighter labor market affected by worker shortages, cited by 61% of survey respondents, followed closely by inflationary pressures at 60%. 
  • Looking beyond pay. Organizations are taking a broader view to address labor market and inflationary pressures. That includes a broader emphasis on DEI, increased workplace flexibility, improving the employee, and changes to health and wellness benefits, compensation and training. 

U.S. employers anticipate 2024 pay raises to remain high as labor market challenges continue, according to WTW’s latest “Salary Budget Planning Survey.” The survey found employers are budgeting an average increase of 4% in 2024. Though down from the actual increase of 4.4% in 2023, the number remains higher than the 3.1% salary increase budget in 2021 and years prior. 

The survey compiled data from April to June 2023 and received approximately 33,000 sets of responses from employers across 150 countries worldwide. In the U.S., 2,090 organizations responded. 

New Research: WorldatWork’s 2023-24 Salary Budget Survey

Based on its feedback, the WTW report found that more than two-thirds (70%) of the U.S. employers surveyed budgeted for pay raises to be either the same or higher in 2023 than 2022. Less than one-quarter (14%) of companies have budgeted for pay raises to be lower than last year. 

“Many clients were asking whether the 2023 salary increases and 2024 forecasts would start coming back down closer to 2021 levels since inflation in the U.S. has started to ease, and we have seen a few high-profile headlines about layoffs,” said Hatti Johansson, research director, reward data intelligence at WTW.  

One area to keep an eye on, Johansson said, is the 14% who said their budgets are lower than projected, likely due to anticipated recession or weaker financial results (actual or forecast).  

Johansson added that salary increases for 2024 are still well above those in the past 10 years. “This fact shows that companies are striving to stay competitive in an ever-changing work climate,” she said. 

The WTW survey also found that concerns over a tighter labor market affected by worker shortages is the most common driver influencing changes in 2023, cited by 61% of respondents expecting changes in their salary budgets, followed closely by inflationary pressures at 60%. 

“We find that though inflation and salary increases generally move in the same direction and impact each other, they are driven by different variables,” Johansson said. “Salary increase budgets are not as elastic as one might think and can lag economic changes as organizations work through the various factors impacting budgets such as affordability, business performance and labor market challenges.” 

Though job creation is high, unemployment remains relatively low, putting pressure on organizations to raise starting salaries to attract new employees. Johansson said almost 70% of companies have either already hired or are considering hiring people high in the relevant salary range.  

“Salary compression occurs when employees with the same skills and experience are paid differently,” she said. “This can happen when newly hired employees are paid higher than more tenured employees due to the need to pay more to attract new candidates.” 

Many organizations (69%) are taking action to address salary compression issues by using part of the salary budget within the annual pay cycle (62%) or through enhanced use of retention bonuses or spot awards (21%). 

According to Lesli Jennings, WTW’s North America leader, work, rewards and careers, there is no single solution — it’s important to take a broad view on the best levers to pull to address labor market and inflationary pressures.  

For example, organizations have been most likely to place a broader emphasis on DEI (59% action already taken and 25% planning/considering) and increased workplace flexibility (57% action already taken and 13% planning/considering) to address labor market and inflationary pressures. Furthermore, organizations are focusing on improving the employee experience (44% action already taken and 41% planning/considering) and are planning or considering changes to health and wellness benefits, compensation and training.  

“We also know that organizations are taking a broad approach to funding their increase in total compensation spend,” Jennings said, noting that 43% of survey respondents indicated they will fund through total rewards optimization, pointing to an approach that considers other factors beyond pay, such as well-being and benefits.  

Editor’s Note: Additional Content 

For more information and resources related to this article see the pages below, which offer quick access to all WorldatWork content on these topics: 

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