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Robust pay increases planned for 2024

Robust pay increases planned for 2024

By on Dec 21, 2023 in Blog, Compensation, Compensation Consulting, HR Consulting, Human Resources consulting |

In her Society for Human Resources Management article, Kathryn Mayer delves into the complex landscape of employee compensation for the upcoming year. As 2024 approaches, U.S. employers, while cautious due to economic uncertainties, are gearing up to offer meaningful salary increases. This decision is a balancing act between the lingering effects of economic challenges and the need to remain competitive in a tight labor market.

Mayer cites two significant surveys that shed light on the salary trends for 2024. The [Watson Towers Wyatt] WTW Salary Budget Planning Survey, engaging over 33,000 employers, forecasts an average salary increase of 4%. This rate, though a slight dip from 2023’s 4.4% increase, marks a significant rise compared to the 3.1% increase seen in 2021 and earlier. Meanwhile, Mercer’s U.S. Compensation Planning Survey projects a slightly more conservative increase of 3.8%, along with an average merit boost of 3.5%.

The undercurrents driving these salary adjustments are multifaceted. High inflation continues to exert pressure, with escalating costs in essentials like food, housing, and healthcare pinching workers’ budgets. Surveys from Bank of America and Charles Schwab reveal a disturbing trend of dwindling financial well-being among employees, compounded by record-high credit card debt and concerns about retirement savings.

Amidst these financial headwinds, the labor market remains tight. Employers are facing significant turnover and attrition, prompting 52% of them, as per the WTW survey, to cite labor market challenges as a key reason for upping salaries. However, salary increments are not the sole focus. Employers are also turning to broader strategies to attract and retain talent. These include increasing workplace flexibility, enhancing focus on inclusion, equity, and diversity, and improving the overall employee experience. Many are also revising salary ranges, with actions like raising starting salaries and reviewing compensation for specific employee groups.

Mayer also highlights the cautionary advice from Hatti Johannsson of WTW, who underscores the importance of strategic thinking in pay decisions. Johannsson cautions against making long-term decisions based on temporary economic conditions, suggesting a need for a careful and measured approach.

Overall, Mayer’s article presents a nuanced view of the salary landscape for 2024. It reflects an environment where employers are juggling the need to maintain a competitive edge in the labor market with the realities of an evolving economic climate.

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