Employers are planning on a 4 percent pay increase in 2024

Several surveys show that employers are planning on a 4 percent pay increase in 2024, down from the 4.4 percent delivered in 2023 and up from 3.1 percent in 2021, which was the approximate pay increase percentage for several years before the pandemic.

Let’s look at the survey results from World at Work, Mercer, and Payscale.

World at Work (WTW) surveyed more than 2,000 US employers for its Salary Budget Planning Survey and learned that respondents are planning an average pay increase of 4 percent in 2024. This projected increase is down from an actual increase of 4.4 percent in 2023 and 4.2 percent in 2022. However, it exceeds the 3.1 percent salary increase for 2021 and the salary increases in pre-pandemic years.

Higher inflation and a competitive labor market have pressured employers to implement higher-than-pre-pandemic wage increases. While inflation fell in June to 3 percent, down from 6.5 percent in 2022, the federal reserve says it may continue to raise interest rates if inflation rises. The US unemployment rate for July 2023 is at 3.5 percent, and over 187,000 jobs were added in July. Fears of a recession or a soft landing are lessening as employers struggle to attract and retain employees.

Mercer reported earlier this year that merit-based pay increases for 2023 were at 3.8 percent, while total compensation increases were at 4.1 percent. Total compensation increases include promotions, cost-of-living adjustments, and minimum-wage-driven increases.

Mercer also found that pay increases varied significantly by industry. For example, the life sciences, energy, and services industries had the highest increases in 2022, with 4.5 percent, 4.4 percent, and 4.4 percent total compensation increases, respectively. Meanwhile, compensation in the healthcare services and retail and wholesale industries lagged, with total compensation increases of only 3.6 percent.

Payscale’s 2023-2024 Salary Budget Survey (SBS) provides insights on projected salary budget submissions collected from 1,757 organizations between May and June of 2023. The survey found that employers are planning an average salary budget increase of 3.8 percent in 2024. Payscale also reported that with inflation decreasing and the labor market cooling compared to the last few years, organizations in the United States are hoping to rein in pay increases. However, wage growth remains elevated — it’s at 6.1 percent as of Q2 2023 according to the Payscale Index. Many employers expect pay increases to remain elevated this year to catch up to recent inflation and to help companies retain employees.

Moreover, Payscale found that employers planned for smaller pay increases in 2022 than they actually delivered. Last year, participants in Payscale’s Salary Budget Survey planned for base salary increases averaging 3.8 percent in the United States. However, according to this year’s Salary Budget Survey, the actual salary increases for 2023 clocked in at 4 percent. This could be repeated in the coming year.

The pressure to catch employee salaries up with inflation, the competitive labor market, and the diminishing fears of a recession in the robust US economy mean employers need to plan for higher-than-pre-pandemic pay increases. Expect 4 percent.

Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and Managing Partner of InnovationOne, LLC. He works with organizations to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: The Best of Empirical Research, Method and Process, and Digitization. He is quoted in business journals such as The Wall Street Journal, Workforce Management, and CEO Magazine. Subscribe to his weekly blogs at http://www.VictorHRConsultant.com

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