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2023 Salary Increases Lower than Projected; Highest Since 2008 Financial Crisis

Today, Mercer released the results of its March 2023 US Compensation Planning Survey revealing that while 2023 compensation increases will be the largest employers have provided since the 2008 financial crisis, the increases fell slightly short of what employers were projecting during November 2022. Click here to read the full blog post.

The survey found US employers reported 2023 annual merit increases averaged 3.8% while total compensation increased by 4.1%. Total compensation includes merit awards as well as all other types of compensation increases impacting base pay, such as promotional increases, cost of living increases, minimum wage increases, etc. These figures represent an increase over 2022 compensation increases, which were 3.4% and 3.8% for merit and total increases, respectively.1 Significant differences were noted by industry.

  • Life sciences, energy, and services lead with 4.5%, 4.4%, and 4.4% total compensation increases, respectively.
  • Healthcare services and retail and wholesale lag, with 3.6% total compensation increases.

Unbudgeted pay increases outside of the typical merit cycle have increased in recent years, and many employers indicated that they were making changes to manage compensation increases with additional governance.

  • 1 in 3 employers indicated that they were adding additional governance or approvals, limiting or freezing off-cycle increases.
  • Further, 1 in 4 employers indicate they will be adding additional governance or approvals, limiting or freezing promotional increases.

Commenting on the findings, Lauren Mason, Senior Principal in Mercer’s Career Practice, said: “The survey indicates that employers are continuing to invest in compensation to combat prolonged tight labor markets, but they are doing this with more prudence than what we saw in 2022. Despite a slight decline from November in what employers were projecting, 2023 compensation increases represent the largest increases employers have provided since the 2008 financial crisis.”

“In 2023, employers are focused on making changes to manage compensation spend more thoughtfully, particularly with increases outside of the annual compensation increase cycle and addressing critical gaps in pay equity.”

“With recent pay transparency legislation, employees have more data than ever to assess their compensation in the external market. This will continue to put more pressure on employer programs, and combined with a continued tight labor market, reinforces the need for continued focus on competitive and equitable compensation.”

 

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