Based on data from consulting firm Mercer, American employers plan to revise their budgets. There seems to be a shift in employer intentions around 2024 compensation budgets based on data collected in this survey of more than 900 organizations. Performance-based merit raises are pegged at 3.5 per cent against 3.8 per cent in 2023.
Employers are trying to budget about 3.9% of their compensation budget towards total salary increases for existing employees in 2024. The 2024 budget will allocate only 3.5% for this purpose; this is lower than the 4.1% of 2023. In addition, companies expect lower promotions will be done to their personnel with a minimal percentage of 8.7% as opposed to the previous year’s number of 10.3%.
Having reduced the rate of employee turnover back to the pre-pandemic level, employers adjust their budgeting taking into account the possibility to maintain the employees more successfully. The shift is also evident in the tech industry which is projected to award only 3.3% in merit increases compared to 3.5% nationally. However, this shows a change as compared to past practices that the tech sector usually led in compensation hikes.
It’s still early in the compensation budgeting cycle, and the numbers may change depending on labour market fluctuations. However, despite the anticipation of having less available for raises in 2024, these projections still surpass pre-pandemic levels when the share of compensation budgets dedicated to salary increases was approximately 3%. If employers maintain similar raise and promotion levels in 2024 as in 2023, they might consider alternative strategies to attract and retain talent. According to an April survey, nearly half of employers intend to revisit their total rewards strategy. These strategies may include offering greater flexibility in work schedules, additional paid time off, and expanded family planning benefits, such as IVF or specialized pregnancy benefits, to provide employees with a well-rounded package of benefits.
