U.S. salary budgets tighten as workforce stabilizes in 2024 – WTW survey
VIRGINIA, UNITED STATES — Employers in the United States are adopting a more conservative approach to salary budgets for 2024, reflecting a stabilizing workforce and shifting economic landscape.
According to the latest Salary Budget Planning Report by WTW, nearly half (47%) of U.S. organizations report lower salary budgets for the 2024 cycle compared to the previous year, with the overall median pay raise falling to 4.1% from 4.5% in 2023.
“Pay equity is top of mind for employers, and giving a big-picture view of what employees are offered ensures the salary increase process is clear and emphasizes the connection to business performance,” said Lesli Jennings, North America leader, Work, Rewards and Careers, WTW.
WTW gathered insights from approximately 32,000 companies across 168 countries between April and June 2024. In the U.S., 1,888 organizations participated.
Holistic approach to compensation, employee benefits
Despite the decrease in salary increases, total annual payroll expenses continue to rise, with 73% of companies reporting higher payroll costs this year.
Over half (51%) of companies have undertaken a compensation review for specific groups, almost half (49%) are hiring at higher salaries, and 45% have conducted a full compensation review of all employees.
Organizations are focusing on workplace flexibility (52%) and improving the employee experience (52%) to address current market conditions and employee needs.
Looking ahead, overall salary budget increases are projected to rise by 3.9% in 2025. While this continues the trend of declining increases since 2023, it remains relatively high by historical standards.
“In light of cost management concerns, employers are taking more of a holistic approach to their reward programs, factoring in bonuses, long-term incentives, and health and wellness benefits; however, a more targeted review of specific employee groups could allow for greater support for those with in-demand skills or those in lower salary ranges,” Jennings added.
Workforce stabilization and talent retention strategies
The tightening of salary budgets comes as employers anticipate lower demand and aim for longer-term stability in their employee base.
This shift follows a period characterized by high resignation and turnover rates.
Notably, the percentage of employers struggling to attract and retain talent has dropped significantly, from 57% two years ago to 38% in 2024.
“As the workplace stabilizes and employers look more toward the future, companies are reviewing and updating their compensation philosophies to ensure they align with business strategy,” Jennings emphasized.
