US employers more conservative with salary budgets as employee base stabilizes

Rhea-AI Summary

WTW's latest Salary Budget Planning Report reveals a more conservative approach to salary budgets among U.S. employers in 2024. Key findings include:

- 47% of organizations report lower salary budgets than the previous year
- Overall median pay raise for 2024 dropped to 4.1%, down from 4.5% in 2023
- Employers anticipate longer-term stability in their workforce
- 38% of employers report difficulty attracting and retaining talent, down from 57% two years ago
- Salary budget increases expected to rise by 3.9% in 2025

Companies are making long-term changes to compensation programs, including targeted reviews and improving workplace flexibility. The focus is shifting towards a more holistic approach to reward programs, considering factors like bonuses, long-term incentives, and health benefits.

NEW YORK, July 15, 2024 (GLOBE NEWSWIRE) -- Almost half (47%) of U.S. organizations report that their salary budgets for the 2024 cycle are lower than the previous year, as the overall median pay raise for 2024 fell to 4.1%, compared with 4.5% in 2023. That’s according to the latest Salary Budget Planning Report by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company.

The report found employers are being more conservative with their salary budgets as they anticipate lower demand resulting in longer-term stability in their employee base following a period of high resignation and turnover. While around two-fifths of employers (38%) report having trouble attracting and retaining talent in 2024, this figure has dropped almost 20 percentage points from two years ago (57%).

Overall salary budget increases are expected to rise by 3.9% in 2025, which, despite declining since 2023, remain fairly high.

In addition, total annual payroll expenses (which include salaries, bonuses, variable pay and benefit costs) continue to rise substantially in the U.S., as a majority (73%) of companies report that their total payroll expense was higher than last year.

Inflation can impact salary budgets in both directions. Those organizations that lowered salary budgets cited concerns related to cost management, weaker financial results and inflationary pressures as the leading causes, whereas those that raised salary budgets this year cited inflationary pressures and a tight labor market.

In light of these issues, companies are looking to make longer-term changes to their compensation programs. Over half (51%) of companies that have made changes to compensation programs or workplace flexibility have undertaken a compensation review for specific groups; almost half (49%) are hiring people at higher salaries, and 45% have undertaken a full compensation review of all employees.

Additionally, organizations are taking actions to address current market conditions and employee needs, particularly providing more workplace flexibility (52%) and improving the employee experience (52%).

“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,” said Lesli Jennings, North America leader, Work, Rewards and Careers, WTW.

“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. 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,” added Jennings.

About the survey

The Salary Budget Planning Report is compiled by WTW’s Rewards Data Intelligence practice. The survey was conducted from April to June of 2024. Approximately 32,000 responses were received from companies across 168 countries worldwide. In the U.S., 1,888 organizations responded.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you. Learn more at wtwco.com.

Media contacts:

Ileana Feoli: +1 212 309 5504
ileana.feoli@wtwco.com

Stacy Bronstein
stacy.bronstein@wtwco.com

FAQ

What is the median pay raise for U.S. employees in 2024 according to WTW's report?

According to WTW's Salary Budget Planning Report, the overall median pay raise for U.S. employees in 2024 is 4.1%, down from 4.5% in 2023.

How many U.S. organizations reported lower salary budgets for 2024?

The WTW report found that 47% of U.S. organizations reported lower salary budgets for the 2024 cycle compared to the previous year.

What percentage of employers are having trouble attracting and retaining talent in 2024?

According to the WTW report, 38% of employers report having trouble attracting and retaining talent in 2024, down from 57% two years ago.

What is the projected salary budget increase for 2025 based on WTW's findings?

WTW's report indicates that overall salary budget increases are expected to rise by 3.9% in 2025.

What percentage of companies report higher total payroll expenses compared to last year?

According to the WTW report, 73% of companies report that their total payroll expense was higher than last year.