Navigating 2024: A Comprehensive Look at Salary Budget Projections
As organizations gear up for the challenges of 2024, there is a discernible trend indicating a pullback in salary increase budgets, deviating from the final figures of 2023. According to Mercer’s recent survey, employers are planning to raise their compensation budgets by 3.5% for merit increases and 3.9% for total salary increase budgets for non-unionized employees.
This projection by Mercer slightly lags behind the numbers reported in WorldatWork’s “2023-24 Salary Budget Survey,” where 2,146 participating organizations anticipated a 4.1% increase in pay budgets and a 3.6% merit increase on average for 2024. Mercer’s data falls between this and other surveys, such as WTW’s survey of 2,090 organizations (projecting a 4% average increase) and Payscale’s survey of 1,757 organizations (projecting a 3.8% increase average).
Merit Increases as a Compensation Lever
Mercer’s survey indicates that organizations are projecting an average merit increase of 3.5% for 2024. While this is slightly below the 3.7% average reported by WorldatWork for 2023, we anticipate merit increases continuing to be a primary compensation lever in 2024. She notes that merit awards encompass various factors, including market movement, equity, and performance, making them a versatile tool for organizations.
Key Industry Findings
Beyond general trends, industry-specific projections offer nuanced insights. Healthcare services are projecting 2024 budgets that lag behind other industries, with merit budgets of 3.1% and total increase budgets of 3.4%, as the sector continues to recover from the financial impact of the pandemic. Layoffs and financial strain in the high-tech industry are impacting merit budgets, with projected increases of 3.3%, a reversal of historical trends where high-tech typically led increases.
In contrast, some industries, including energy and consumer goods, are planning merit budgets above the national average, projecting an increase of 3.7%. Notably, employers are planning to promote fewer employees (8.7% of the employee population) and will allocate less of their budget (1.1%) to promotional increases in 2024, signaling a shift from the 2023 figures of 10.3% promoted and 1.2% budget allocated.
Conclusion
As organizations chart their course for 2024, the landscape is marked by caution, strategic planning, and an awareness of the evolving dynamics in the labor market. The projections for the year ahead highlight the need for organizations to remain agile, considering both overarching trends and industry-specific factors in their compensation strategies.