Survey finds overall average increase will be largest since 2008
Looking to 2023, U.S. companies are budgeting an overall average salary increase of 4.1 per cent for 2023, compared with the average actual 4.0 per cent increase in 2022.
These are the largest increases since 2008, according to a survey by advisory, broking and solutions company WTW,
Nearly two in three (64 per cent) employers have budgeted for higher employee pay raises than last year, while two-fifths (41 per cent) have increased budgets since original projections were made earlier this year.
Less than half of companies (45 per cent) are sticking with the pay budgets they set at the start of the year, finds the survey with 22,570 sets of responses from companies across 168 countries worldwide in April and May.
How is record inflation in Canada impacting compensation and benefits?
Concerns over a tighter labour market seem to be the main driver for the higher budgets, according to three in four respondents (73 per cent).
Additionally, 46 per cent cited employee expectations for higher increases that are driven by inflation, and 28 per cent anticipate stronger financial results.
Changing comp strategies
Some companies are also making more frequent salary increase adjustments, says WTW. More than one-third (36 per cent) have increased or plan to increase how often they raise salaries. Among those, 92 per cent have or will adjust salaries twice per year.
“Compounding economic conditions and new ways of working are leading organizations to continually reassess their salary budgets to remain competitive,” said Hatti Johansson, research director for rewards data intelligence at WTW.
“With such a dynamic environment, it’s imperative for organizations not only to have a clear compensation strategy but also a keen understanding and appreciation of the factors that influence compensation growth. And, if an organization is planning to increase budgets, it’s best to be prepared as to how to award and communicate pay changes as quickly and effectively as possible.”
In dealing with labour shortages, more than half (55 per cent) of Canadian employers are turning to larger than normal increases of wages while 66 per cent are increasing recruiting efforts, according to a report from the Bank of Canada.
Attraction and retention
While attraction and retention challenges continue to plague organizations, fewer employers expect those difficulties to be at the same level next year. Over nine in 10 (94 per cent) are experiencing difficulties attracting talent this year, but only 40 per cent expect the same in 2023.
The threat of recession is not doing employers any favour when it comes to retention, according to a report.
Similarly, 89 per cent of companies reported difficulty retaining workers this year, but that number is expected to drop to just under 60 per cent next year.
To attract talent, 69 per cent of respondents have increased workplace flexibility, and 19 per cent are planning or considering doing so in the next couple of years, finds the survey.
Six in 10 (59 per cent) have placed a broader emphasis on diversity, equity and inclusion (DEI), and 24 per cent are planning or considering doing so in the next few years. Additionally, 49 per cent of companies continue to enhance recruitment offers with sign-on bonuses and equity/long-term incentive awards, while over 21 per cent are planning or considering doing so in the next few years.
To retain talent, almost three-fifths (58 per cent) of companies have boosted their emphasis on DEI, and over 26 per cent are planning or considering doing so.
In addition, half (50 per cent) have increased the flexibility for remote work, and 25 per cent are planning or considering doing so in the future. Almost 40 per cent have changed their compensation programs (such as base salary and short- and long-term incentive plans), and another 35 per cent are planning or considering this.