US employers more conservative with salary budgets as employee base stabilizes
July 15 2024 - 11:55AM
Almost half (47%) of U.S. organizations report that their salary
budgets for the 2024 cycle are lower than the previous year, as the
overall median pay raise for 2024 fell to 4.1%, compared with 4.5%
in 2023. That’s according to the latest Salary Budget Planning
Report by WTW (NASDAQ: WTW), a leading global advisory, broking and
solutions company.
The report found employers are being more conservative with
their salary budgets as they anticipate lower demand resulting in
longer-term stability in their employee base following a period of
high resignation and turnover. While around two-fifths of employers
(38%) report having trouble attracting and retaining talent in
2024, this figure has dropped almost 20 percentage points from two
years ago (57%).
Overall salary budget increases are expected to rise by 3.9% in
2025, which, despite declining since 2023, remain fairly high.
In addition, total annual payroll expenses (which include
salaries, bonuses, variable pay and benefit costs) continue to rise
substantially in the U.S., as a majority (73%) of companies report
that their total payroll expense was higher than last year.
Inflation can impact salary budgets in both directions. Those
organizations that lowered salary budgets cited concerns related to
cost management, weaker financial results and inflationary
pressures as the leading causes, whereas those that raised salary
budgets this year cited inflationary pressures and a tight labor
market.
In light of these issues, companies are looking to make
longer-term changes to their compensation programs. Over half (51%)
of companies that have made changes to compensation programs or
workplace flexibility have undertaken a compensation review for
specific groups; almost half (49%) are hiring people at higher
salaries, and 45% have undertaken a full compensation review of all
employees.
Additionally, organizations are taking actions to address
current market conditions and employee needs, particularly
providing more workplace flexibility (52%) and improving the
employee experience (52%).
“As the workplace stabilizes and employers look more toward the
future, companies are reviewing and updating their compensation
philosophies to ensure they align with business strategy,” said
Lesli Jennings, North America leader, Work, Rewards and Careers,
WTW.
“In light of cost management concerns, employers are taking more
of a holistic approach to their reward programs, factoring in
bonuses, long-term incentives, and health and wellness benefits;
however, a more targeted review of specific employee groups could
allow for greater support for those with in-demand skills or those
in lower salary ranges. Pay equity is top of mind for employers,
and giving a big-picture view of what employees are offered ensures
the salary increase process is clear and emphasizes the connection
to business performance,” added Jennings.
About the survey
The Salary Budget Planning Report is compiled by WTW’s Rewards
Data Intelligence practice. The survey was conducted from April to
June of 2024. Approximately 32,000 responses were received from
companies across 168 countries worldwide. In the U.S., 1,888
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: +1 212 309 5504ileana.feoli@wtwco.com
Stacy Bronsteinstacy.bronstein@wtwco.com
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