Are Employers Putting the Brakes on Salary Increases in 2024?

A high number of organizations (78% in the U.S., 81% in Canada) anticipate their salary budgets in 2024 to increase or remain the same as 2023. Conversely, the proportion of organizations expecting to reduce their salary increase budgets has grown from 9% to 22%.

What’s going on:

Payscale Inc., a compensation management firm, released its eighth annual Salary Budget Survey (SBS). The report predicts that average pay increases in 2024 will be 3.8% in the United States, with some states and industries seeing higher increases. Despite a cooling labor market, a high number of organizations (78% in the U.S., 81% in Canada) anticipate their salary budgets in 2024 to increase or remain the same as 2023.

Conversely, the proportion of organizations expecting to reduce their salary increase budgets has grown from 9% to 22%.

Why it matters:

The data suggests a contrast between employers wanting to return to more conservative pay increases and workers’ expectations of higher pay to counteract higher inflation than in previous years. These changing employee expectations might influence employee retention rates in the coming year.

How it’ll impact the future:

If organizations move to lower their salary increase budgets, this could create a tighter compensation environment — potentially causing dissatisfaction among employees and possibly driving them to seek higher pay elsewhere. On the other hand, the persisting skills shortage in certain sectors might force companies to offer more competitive pay to attract the necessary talent. These changing dynamics may cause companies to reanalyze their compensation packages and employee retention efforts.