Nearly half (47 per cent) of U.S. employers report their salary budgets for 2024 are lower than the previous year, as the overall median pay raise for 2024 fell to 4.1 per cent, down from 4.5 per cent in 2023, according to a new survey by WTW.
The survey, which polled more than 1,800 employers, found salary budget increases are expected to rise by 3.9 per cent in 2025, which, despite declining since 2023, remain fairly high.
Total annual payroll expenses, which include salaries, bonuses, variable pay and benefits costs, continued to rise substantially in the U.S., as 73 per cent of companies reported their total payroll expense was higher than last year.
Read: 36% of employers changing initial 2024 salary budgets: survey
Organizations that lowered their salary budget 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 labour market.
Half (51 per cent) of companies that have made changes to compensation programs or workplace flexibility have undertaken a compensation review for specific groups. Almost half (49 per cent) said they’re hiring people at higher salaries and 45 per cent have undertaken a full compensation review of all employees.
While 38 per cent of employers reported having trouble attracting and retaining talent in 2024, this figure has dropped significantly from two years ago (57 per cent). Organizations reported taking actions to address current market conditions and employee needs by providing more workplace flexibility and improving the employee experience (both 52 per cent).
“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 of work, rewards and careers at WTW, in a press release. “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.”
Read: Canadian employers planning average salary increase budgets of 3.8%: survey