Mostly large US corporations are projecting an average increase in their base pay budgets of 3.9% for next year, according to a new survey of 300 compensation leaders across 11 major industries from The Conference Board.
That is lower than the 4.4% average increase they paid out in 2023, which marked a 20-year high for base pay raises. But it is a tick up from the 3.8% bump that companies were paying out this year, according to The Conference Board.
Base pay budget increases are typically viewed as a proxy for the average raises employees may receive.
“Despite a slower pace of hiring and slight increases in unemployment, elevated wages are expected to continue into 2025,” Conference Board chief economist Dana Peterson said in a statement. “A shrinking labor supply is driving businesses to focus on retaining their current workforce, leading to sustained salary increases and higher real wage growth as inflation moderates.”
Respondents who took the survey, which was fielded between mid-May and mid-June, hailed mostly from larger US multinationals. Nearly 80% of the businesses represented generate more than $1 billion in revenue, and close to half of the respondents work at companies with at least 10,000 employees.
In addition, to help retain critical talent, many respondents said they plan to tap more of their pay increase budget throughout the year for promotions (39%); to keep pay competitive based on external market pressures (32%); to bring pay up to the minimum for salary ranges for a given role (29%); to recognize a change in role responsibilities (18%) as well as critical roles (12%); and to reward key players (7%).
On the issue of pay equity, which has been the focus of new state and local pay transparency laws, the Conference Board had this to say in its report: “The continued focus on pay equity within organizations, driven by legal requirements and new mandates, signals that pay transparency and retention are influencing total compensation strategies.”
Compensation leaders also said that they will continue to use non-base-pay strategies to increase overall compensation as well (such as various types of bonuses). But they indicated they won’t rely on retention and sign-on bonuses as heavily as they did during the pandemic.
The survey found that among the 11 industries represented by respondents, the highest planned overall increases were reported by the compensation leaders hailing from companies in insurance, energy/agriculture and communications. The lowest were in trade and diversified services companies.
The projections from all salary surveys — several more of which may be released in the coming weeks from other HR research and consulting organizations — may differ somewhat from each other, depending on how broad the swath of employers surveyed was. And it’s important to remember they are all just projections. Actual base pay increases next year may be different if economic and business conditions change.
