U.S. employers anticipate 2024 pay raises to remain high as labor market challenges remain, WTW survey finds
June 29 2023 - 10:58AM
Salary budgets for U.S. employees are expected to remain high in
2024 as employers become accustomed to ongoing labor market
challenges. According to the latest Salary Budget Planning Survey
by WTW (NASDAQ: WTW), a leading global advisory, broking and
solutions company, organizations are budgeting an average increase
of 4.0% in 2024. Though down from the actual increase of 4.4% in
2023, the numbers remain higher than the 3.1% salary increase
budget in 2021 and years prior.
The survey found that more than two-thirds (70%) of U.S.
employers 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.
Concerns over a tighter labor market impacted by worker
shortages is the most commonly cited driver influencing changes in
2023, cited by nearly two-thirds (61%) of respondents expecting
changes in their salary budgets, followed closely by inflationary
pressures (60%). Other factors prompting changes to salary budgets
include concerns regarding employee expectations (24%), anticipated
recession or weaker financial results (23%) and cost management
(20%).
“While we are seeing lower salary increases forecasted for next
year, they’re still well above the ones we’ve seen for the past 10
years. This shows that companies are striving to stay competitive
in an everchanging work climate,” said Hatti Johansson, research
director, Reward Data Intelligence, WTW. “Those companies that have
a clear compensation strategy as well as a pulse on the factors
affecting it will be more successful attracting and retaining
employees while keeping pace with an evolving environment in which
yesterday’s certainties no longer apply.”
According to the survey, more than half (51%) of organizations
this year reported having difficulty with attraction or retention,
compared with 57% last year. Respondents are expecting labor market
pressures to ease, with only 35% expecting difficulties in
2024.
In response to these ongoing pressures, organizations are taking
action to attract and retain talent. Half (50%) of respondents have
reviewed compensation of specific employee groups, and 28% are
planning or considering doing so. Additionally, 44% are hiring
people higher in relevant salary ranges, raising starting salary
ranges (43%), reviewing compensation of all employees (42%) and
enhancing use of retention bonuses or spot awards (40%).
Non-monetary actions to attract and retain talent are in motion
as well. More than half (59%) of respondents have broadened their
emphasis on diversity, equity and inclusion, and 25% are planning
or considering doing so. Nearly as many (58%) have increased
workplace flexibility. While 46% of respondents have taken action
to improve their employees’ experience, 41% are planning or
considering doing so. Other measures taken include changing health
and wellness benefits (36%), modifying reward elements of
compensation programs (33%) and increasing training opportunities
(26%). Almost half (43%) reported funding the increase in total
compensation spend through total rewards optimization (up from 21%
in 2022).
“It takes more than compensation to attract and keep great
talent, and the past few years have pressed companies to be more
resourceful,” said Lesli Jennings, North America leader, Work,
Rewards & Careers, WTW. “As workforces become more diverse,
demanding and dynamic, the key is understanding their specific
needs and preferences while providing the desired employee
experience and career opportunities within the company.”
About the survey
The Salary Budget Planning Report is compiled by WTW’s Reward
Data Intelligence practice. The survey was conducted in April to
June 2023. Approximately 33,000 sets of responses were received
from companies across 150 countries worldwide. In the U.S., 2,090
organizations responded.
About WTW
At WTW (NASDAQ: WTW), we provide data-driven, insight-led
solutions in the areas of people, risk and capital. Leveraging the
global view and local expertise of our colleagues serving 140
countries and markets, we help organizations sharpen their
strategy, enhance organizational resilience, motivate their
workforce and maximize performance.
Working shoulder to shoulder with our clients, we uncover
opportunities for sustainable success—and provide perspective that
moves you. Learn more at wtwco.com.
Media contacts:
Ileana Feoli
ileana.feoli@wtwco.com
Stacy Bronstein
stacy.bronstein@wtwco.com
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