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U.S. Pay Raises to Remain High in 2024

U.S. employers are planning an overall average salary increase of 4.0% for 2024. That’s according to the latest Salary Budget Planning Survey by WTW, a leading global advisory, broking, and solutions company. Though down from the actual average increase of 4.4% in 2023, the numbers remain well above the 3.1% salary increase budget in 2021 and years prior.  

Inflationary pressures (55%) and concerns over a tight labor market (52%) are the primary influencing factors behind salary increase budgets, both cited by over half of employers surveyed.  

Yet, inflation is slowing down from the highs of recent years, and the labor market is shifting, with voluntary turnover and attrition at 11% overall. While still a common concern, fewer organizations are reporting issues with attraction and retention, down from 60% in 2022 to 48% currently.  

“We are seeing healthy salary increases forecasted for 2024,” says Hatti Johannson, 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. 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.  

Still, employers seek to strike a healthy balance within their total rewards packages. Non-monetary actions are a big focus for employers looking to attract and retain. At most organizations, these include more workplace flexibility (63%), broader emphasis on DEI (60%), and improving the employee experience (55%). Additionally, most employers have committed to hiring staff in a higher salary range (55%), undertaking compensation reviews of specific employee groups (54%), and raising starting salary ranges, which could also be seen as a reflection of the increased emphasis on pay transparency. 

Organizations also report moving toward greater work flexibility, as over half (55%) of employers offer a choice of remote, on-site, or hybrid working, while 31% offer a flexible work schedule. As this trend grows, some companies are changing rewards in line with remote working: 13% of employers have acted or are planning to change allowances, 10% of employers have or are planning to change benefits, and 11% have or are planning to adjust base pay.  

“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. Compensation is a sensitive topic and often managers feel uneasy when it comes to talking about pay. Our research shows the most common barrier to organizations communicating more openly about pay is fear of employee reactions. We recommend training for managers on their role, how the compensation program works, and how to communicate it effectively,” says Sara Vallas, senior director of employee experience at WTW. “Improving the pay conversation goes a long way in improving the overall employee experience and further stabilizing the workforce.”  

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