Employers predict ‘modest’ 3.9% pay increases for 2024

Dive Transient:

• U.S. employers are planning more modest compensation increases for 2024 than they budgeted for 2023, though subsequent yr’s budgets stay properly above pre-pandemic ranges, respondents instructed Mercer in an August compensation survey.
• For 2024, employers mentioned they plan benefit will increase of three.5%, in comparison with 3.8% precise benefit will increase in 2023, the Sept. 25 outcomes present. In addition they plan whole wage will increase (together with promotion-related pay will increase and price of dwelling changes) of three.9% for nonunionized workers, a lower from 4.1% in 2023, in line with the report. In a reversal of historic developments — attributable to layoffs and monetary pressure — the high-tech trade has projected benefit will increase beneath the nationwide common, at 3.3%, Mercer mentioned. In contrast, the buyer items, power and insurance coverage/reinsurance industries are taking the lead, with deliberate benefit will increase of three.7%, barely increased than the typical. Projected budgets by healthcare providers lag beneath the typical, with deliberate benefit will increase of three.1%, the report discovered.
• These slight declines replicate “the continuing tightness of the labor market and low ranges of unemployment,” Lauren Mason, a senior principal at Mercer, mentioned in an announcement. “Nonetheless, if the labor market continues to stabilize and inflation cools additional as we transfer in the direction of the tip of the yr, compensation pressures are more likely to proceed to say no,” Mason mentioned.

Dive Perception:

“Cautious optimism” will be the survey’s message, as compensation budgets appear in step with Mason’s prediction that employers should modify their methods to replicate the altering financial panorama if inflation cools and the labor market returns to pre-pandemic ranges.

Wage price range surveys launched by Payscale in late July and WTW on the finish of June recommend employers have been adjusting their 2024 compensation budgets as circumstances fluctuate. U.S. employers instructed Payscale they anticipate to raise salaries 3.8% subsequent yr. In response to the report from WTW launched a month earlier, employers had been planning annual salary increases of about 4%.

The surveys affirm that employers stay involved about staying aggressive amid expertise shortages in an ever-changing work setting. As of Mercer’s September report, the labor market was nonetheless extraordinarily scorching — brief 3 million staff (the hole between the variety of job openings and unemployed staff), the agency identified.

Even so, promotions aren’t anticipated to play as large a job subsequent yr in whole rewards packages, the report confirmed. Employers plan to advertise 8.7% of their worker inhabitants in 2024 and spend 1.1% of their compensation price range on associated pay will increase, in line with the August 2023 survey.

By comparability, in an August 2022 survey, employers mentioned they anticipated to advertise greater than 10% of workers for 2023 and allocate 1.3% of their wage price range to take action. “It’s not an enormous change, but it surely does seem like employers are planning to advertise a smaller inhabitants and allocate much less of their price range,” Mercer mentioned.

Nonetheless, almost all (85%) of the 900 responding organizations of all sizes (fewer than 500 workers to over 20,000) mentioned they had been solely within the preliminary phases of creating subsequent yr’s price range, Mercer discovered. 

The survey additionally revealed that in 2023, worker base salaries elevated 5.6% on common, regardless of benefit enhance budgets of three.8%, Mercer mentioned. The distinction was attributable to off-cycle will increase, which almost 6 in 10 employers reported offering. Employers mentioned they used these will increase to handle retention considerations, counteroffers, market changes and inside fairness, the agency famous.

Firms instructed WTW in 2022 they deliberate to fund projected 4.6% pay increases for 2023 by adjusting compensation and profit plans, rising costs and thru firm restructuring and workers reductions.

Going ahead, Mason supplied a key tip: When planning for 2024, it’s essential for employers to “transfer away from the reactive strategy of the previous few years and undertake a extra strategic strategy.” This, she mentioned, will allow employers to “focus their compensation investments on essentially the most essential attraction and retention segments of their workforce, whereas additionally guaranteeing that pay will increase are distributed pretty and equitably.”