Many organizations entered 2022 with their salary increase budgets revised upward from what they had planned just months earlier in anticipation of what would be required to attract and retain talent in the tight labor market.
As a result, WorldatWork’s “2022-23 Salary Budget Survey” revealed that salary increase budgets reached their highest level in 20 years in the United States, rising to an average of 4.1% in 2022 with a 3.8% median. What’s more, the survey revealed this level is expected to be maintained, as a 4.1% average increased budget is projected for 2023.
In the spring of 2021, U.S. respondents projected that 2022 total salary increase budgets would rise modestly from 2021’s 3% average to a 3.3% average while the median prediction (3%) showed no change from 2021’s actual median increase of 3%.
The higher predicted 3.3% average suggested that a portion of respondents were anticipating notably higher increase budgets going forward, perhaps as they expected to compensate for pay increases that were delayed or deferred in prior years and to address increasing labor market pressure.
WorldatWork’s “Salary Budget Quick Poll” conducted in January 2022 reported that more than half of respondents had increased their 2022 salary increase budget projections in the past six months — 5% by more than twice and 49% by up to two times.
“The rapid rise in salary increase budgets over the past couple years, combined with today’s volatile economic environment present a challenge to HR pros,” said Sue Holloway, director of compensation content at WorldatWork. “They must leverage data and think strategically as they formulate 2023 compensation budget recommendations and negotiate with CFOs.”
When asked how certain they felt about their 2023 salary increase budget projections, nearly half of respondents (48%) felt moderately certain and more than a quarter (26%) felt slightly certain. Nearly equal proportions reported being not at all certain (13%) and very certain (12%) while only a few (2%) felt extremely certain.
As it did in 2021, WorldatWork will conduct a special pulse poll in the fall to monitor whether projections are changing as the year unfolds.
- Timing of pay increases. The average time between increases across all employee categories returned to the historical average of 12 months, with executives’ average at a slightly greater 12.3-month average.
- Portion of workforce receiving increases. On average, participating organizations reported awarding at least some base salary increases (e.g. general increase/COLA, merit increase) to 88% of employees in 2022.
- Canada expects similar increases. The average Canadian total salary increase budget was 3.7% in 2022 (3.2% median), more than a one percentage rise from the 2.6% increase budgeted in 2021, and exceeding the 2022 projection (2.9%) by 0.8 percentage points.
- Large increase budgets reported in India. India once again saw the largest salary increase budget among countries in this survey. At 10.1% average total increase, salary increase budgets have edged past their pre-pandemic level of 9.9%
- UK up significantly from pre-pandemic levels. UK salary increase budgets reached an average of 3.8% in 2022, exceeding pre-pandemic levels of 3.1% last seen in 2018 and 2019.
- Large budget jumps in Brazil. Brazil saw the greatest year-over-year gain in salary increase budget, going from 4.3% in 2021 to 6.7% in 2022.
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