The overall salary increases in the US are forecast to rise 4.6% in 2023, up from an actual increase of 4.2% this year, according to the new “Salary Budget Planning” report by global advisory firm WTW. Labor market and inflationary pressure are fueling the higher-than-projected increases.
According to the report, the pay increases are driven by companies’ reaction to inflationary pressures, 77%, and concerns over the tighter labor market, 68%. Meanwhile, while current pay budgets have risen to 4.2% in 2022, 70% of companies spent more than they originally planned on pay adjustments for the past 12 months.
The report found that as economic challenges loom large in the US, 21% of organizations that are increasing salary budgets have said they will fund increased spending by offering compensation plans and benefit programs that their employees value most. Seventeen percent will raise funds by increasing prices, and 12% will resort to company restructuring and reducing staff head counts.
The report noted that in addition to pay pressures, 75% of companies are experiencing problems attracting and retaining talent — a figure that has nearly tripled since 2020. Meanwhile, the tight labor market has been an influencing factor in the decision of 68% of organizations to increase salary budgets.
“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, 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.”
The report summarizes the findings of WTW’s annual survey on salary movement and reviews practices as a means of helping companies with their compensation planning for 2023 and beyond.
Source: Staffing Industry Analysts