U.S. employers plan on offering smaller pay raises in 2024.
As economic conditions start to improve across the U.S. due to easing inflation and a cooling labor market, many employers plan to offer their workers reduced salary increases in the coming year, according to the latest Salary Budget Planning Survey by WTW, reported the Dallas Business Journal.
The majority of U.S. companies plan on offering salary increases of 4% in 2024, which is down slightly from the 4.4% wage increase offered by employers in 2023, WTW data shows.
However, the latest ADP employment data for November shows that employees who stayed at the same job over the past 12 months saw their wages increase by 5.6% compared with an 8.3% increase for people who left their job for another in the same time period, as reported by The Dallas Express.
While salary increases are anticipated to be smaller in 2024, companies are still forecasting “healthy salary increases,” according to Hatti Johannsson, research director of reward, data, and intelligence at WTW.
“Though economic uncertainty looms, employers are looking to remain competitive for talent, and pay is a key factor,” she said, per the DBJ. “At the same time, organizations should remember pay levels are difficult to reduce if markets deteriorate. It’s best to avoid basing decisions that will have long-term implications on their organization on temporary economic conditions.”
WTW survey results show that 54% of respondents said they plan to undertake a compensation review in 2024 while about 49% said they plan to raise starting salaries. Other survey results show that 55% of employers reported offering a choice of remote, onsite, or hybrid work, while 31% said they offer a flexible work schedule to employees.
Experts recommend that companies be upfront and clear with employees about their compensation policies.
“With ongoing uncertainty, especially around pay transparency, we see organizations do better where there is a foundational level of understanding among all employees — on the compensation philosophy, the program design, and how decisions about pay are made,” said Sara Vallas, senior director of employee experience at WTW. “Compensation is a sensitive topic and, often, managers feel uneasy when it comes to talking about pay.”
“Improving the pay conversation goes a long way in improving the overall employee experience and further stabilizing the workforce,” Vallas added, per the DBJ.
