Average US Pay Increase Projected to Hit 4.6% in 2023
Labor market and inflationary pressure fuel higher-than-projected salary growth
Employers in the U.S. plan to boost salaries an average of 4.6 percent in 2023, up from 4.2 percent this year, according to a new study.
Employers say inflationary pressures and the ongoing challenges of finding and keeping workers are the main reasons for the higher projected increases. Indeed, 3 in 4 of the 1,550 U.S. employers in the latest Salary Budget Planning Report by consultancy WTW say they continue to experience problems attracting and retaining workers. The survey was conducted from Oct. 3 to Nov. 4, 2022.
To fund higher pay, organizations said they are limiting benefits and perks to those most valued by employees (21 percent of respondents), raising the prices of their products or services (17 percent), and resorting to company restructures and reduced staff headcounts (12 percent).
"As inflation continues to rise and the threat of an economic downturn looms, companies are using a range of measures to support their staff during this time," said Hatti Johansson, research director for reward data intelligence at WTW. "Organizations should prioritize their actions based on the needs of both employers and employees and pay close attention to market data to inform any changes."
Adjusting Salary Ranges
To tackle the competitive labor market, more than half of respondents (57 percent) have hired candidates higher in the relevant salary range, WTW found, while a further 76 percent have adjusted or are considering adjusting salary ranges more aggressively, increasing ranges by 2 percent to 5 percent.
More than two-fifths of organizations either have adjusted or are considering adjusting salaries more aggressively; 90 percent of organizations making or considering salary increase adjustments are doing two adjustments per year.
Earlier Forecasts
Other pay surveys, mostly conducted near midyear, showed that salary increase budgets in the U.S. were projected to grow, on average, around 4 percent for 2023, with some industries planning increases lower or higher than the overall average, SHRM Online previously reported.
Lower Inflation Still Outpacing Pay Gains
The consumer price index rose 7.7 percent for the 12 months ending in October, a notable decrease from the 9.1 percent high notched for the period ending in June but well above its longtime average, leaving workers' pay raises still significantly trailing the rising costs.
Insufficient Pay Raises Drive Employee Turnover HR professionals in the U.S. say inadequate compensation is the biggest reason employees are leaving, according to new findings released on Nov. 17 by SHRM Research. The Better Workplaces on a Budget survey report and Better Workplaces on a Budget Recommendations report draw on a survey conducted in August among 1,500 HR professionals. Inadequate total compensation was the most common driver of turnover, ranked among the top three reasons by 74 percent of respondents and listed as the top reason by 39 percent, the survey found. Relatedly, an 8 percent to 10 percent additional compensation budget would be required to address the issue, HR professionals generally agreed. "It is clear that most companies cannot or will not commit to 8 percent to 10 percent pay raises for next year," Mark Smith, director of HR thought leadership at SHRM Research, told Yahoo! Money. "In fact, pay raises in most companies seem to be only slightly higher than traditional raises from recent years." Among other findings:
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