In the end, these analyses would confirm salary growth that eclipses the 3% salary budget. Have feedback on this article? Overall salary increases in the US will be the most since 2007, a survey of 1.550 organizations from workplace consultant Willis Towers Watson (WTW) found, and above the 4.2% increase for this . However, bowing to public pressure and succumbing to gut instinct wont serve anyone in the long term. The Salary Budget Planning Report is compiled by WTWs Reward Data Intelligence practice. Labor market and inflationary pressure fueling higher-than-projected increases. Set aside salary budget projections to look at real wage growth. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance. Frontline hourly workers: Cant get them. Notably, raises are returning to pre-pandemic levels. US employers say they expect to increase pay by 4.1% on average for 2023, which would be the highest level in 15 years. More than ever, making the most of your capital means solving a complex risk-and-return equation. This translates to . Editors note: At the time of publication, WTW has reported that salary budgets in the U.S. are showing median salary budget 2021 actuals and 2022 projections of 3% (with more than 1,000 companies reporting). However, also consider that the rate was 3.5% in January and February 2020, and then went up slightly in March 2020 to 4.4%. Remember that a one-size-fits-all approach wont work. Your ability to manage risk is key to your thriving in an uncertain world. These are followed by Germany, Spain, United Kingdom, China, Canada and Mexico, which have a projection of 4 percentage points higher in 2022 compared to 2021. 2009-Project 2011 Data: World at Work Surveys Only. The United States is projecting an average increase of 4.6% in 2023, which is above the 2022 average actual increase of 4.2% the highest since 2008 and higher than 3.1% in 2021 and 3% in 2020. This includes both monetary and nonmonetary actions to attract and retain employees particularly for critical or high-performing talent. Your ability to manage risk is key to your thriving in an uncertain world. For those industries that were losers in the pandemic, going from a 1% or 2% salary budget back to 3% is a huge increase, even though it isnt telling that story in the overall salary budget data. But these actions dont happen simultaneously. Maintaining an on-going relationship with clients and gaining an understanding of the clients' business and industry. Dive Brief: Amid accelerating inflation and tight competition for workers, U.S. companies plan to boost employee pay next year at a higher rate than in 2021, projecting 3% salary increases for executives, management, professional employees and support staff, and 2.8% higher payrolls for production and manual labor employees, according to a Willis Towers Watson survey. With a strong propensity to control fixed costs, its no wonder that executives and HR look to tightly manage salary budgets. Oil and gas industry companies, as well as leisure and hospitality industry companies, are budgeting significantly lower salary increases for employees (2.4%). ARLINGTON, VA, January 13, 2022 - Fueled by tight labor markets, U.S. employers are boosting their original salary increase projections for 2022 as the Great Resignation shows no signs of abating. Bonuses, which are generally tied to company and employee performance goals, averaged 16.0% of salary for management and professional employees. By But increased salary budgets only make it more critical for organizations to have a clear strategy for awarding pay increases as effectively as possible, prioritize critical employees and hot jobs, and differentiate for performance. Thus, population trends show that there are and will continue to be fewer workers to fill needed positions. For instance, as a result of recognizing that labor shortages, and not inflation, are the primary driver of growing salary budgets, many employers are targeting certain segments such as hourly workers, digital talent and workers with in-demand skills to receive higher pay.. Nearly three in four respondents (74%) cited the tight labor market for increasing their budgets from prior projections, while only one-third cited anticipated stronger financial results (34%) and inflation or the rising cost of supplies (31%). Production and manual labor employees are in line to receive average increases of 2.8% next year, higher than the average 2.5% increases this year. It will be interesting to observe whether these nations are, in fact, able to maintain these levels. Global Innovation and Product Development Leader, Rewards Data Intelligence, Average increase of salary budgets in 2023 forecasted by the 15 largest economies, Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). According to WTWs John Bremen, despite overall population growth (11.9%) and labor force growth (4.5%), the labor force shrank 3.4% from 2010 to 2020 among the historical entry-level talent pool (workers ages 16 to 24). January 28, 2022. Attracting and retaining employees remains a major challenge for employers. Zhongzhi Enterprise Group Co., Ltd. Jan 2014 - Feb 20173 years 2 months. Action, reaction or no action? One in three employers bumped up original salary increase projections. Most (if any) of these are not factored into a merit budget or the data reported for salary budget projections. Results from our salary budget planning survey, By The best way to understand how your organization may need to increase pay in the future is to analyze all changes to pay throughout a complete calendar year, not just the one-time event that represents the merit pay process. When asked why, responses spoke to the likelihood of sustaining the gains earned in 2020 and that conservatively managing fixed costs protects companies from having to take more drastic measures if high financial gains reversed in 2021 or beyond. Merit increases in the General Industry entering and during the last three periods of U.S. economic downturn, Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). Clients depend on us for specialized industry expertise. Industrial manufacturing: 2.6% to 3.4%. Our Bloomberg On-Site Support (BOS) teams provide 24/7 on-site technical solutions to Bloomberg's internal and external customers in more than 75 countries. While its true that employees buying power is diminished when salary increases are lower than inflation, remember that pay never goes down even when inflation goes down. Belgium), your salary increases will need to follow the guidelines. For more countries, budgets for the upcoming cycle have changed from increases projected earlier in 2020. The United States is projecting an average increase of 4.1% in 2023, which is aligned with the 2022 average actual increase of 4.0% the highest since 2008 and higher than 3.1% in 2021 and 3% in 2020. Had the pandemic never happened, we likely would still be facing labor shortages. In 2020 when the pandemic began, Fusco adds, just . Together, we unlock potential. Organizations with operations in Russia are forecasting salary increase budgets of 7.3% in 2023, which is half a percentage point higher in 2023 compared to the 2022 average actual increase of 6.8%. Tight labor markets, inflationary pressures and employee retention concerns fueled salary increases to rates not seen in nearly two decades. Results from our latest Salary Budget Planning Survey suggest that 96% of companies globally will increase salaries. To tackle the competitive labor market, more than half of respondents (57%) have hired candidates higher in the relevant salary range, while a further 76% have adjusted or are considering adjusting salary ranges more aggressively, increasing ranges by 2% to 5%. The 15 largest economies are forecasting an average increase of 4.9% in 2023, which is 0.9 percentage points higher than the 4% actual increase in 2021 and aligned with the 4.9% average increase granted in 2022. COVID-19 also affected the financial health of different industries to the extremes. In fact, 67% of organizations reported increasing their total compensation spend in 2022 as compared to 2021. For example, one goal may be to retain critical roles and resolve any possible inequity issues. Even with this lag, it would be natural to expect greater movement than the 2022 median projections of roughly the same 3% theyve been for so long, but that hasnt happened. Cant keep them. The survey also revealed over nine in 10 companies (91%) awarded annual performance bonuses this year based on 2020 performance, significantly higher than 76% of companies that awarded them last year. Long story short, prioritizing and segmenting rewards actions will be vital for an appropriate return on investment. By Zoe Wickens 14th January 2022 9:04 am. All rights reserved. The average actual salary increase hit 4.9% in 2022, as compared to a 4.0% actual increase amount in 2021, among those organizations that granted increases in the top 15 economies around the world. For instance, as a result of recognizing that labor shortages, and not inflation, are the primary driver of growing salary budgets, many employers are targeting certain segments such as hourly workers, digital talent and workers with in-demand skills to receive higher pay.". At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. This is up from the average 2.7% increases companies granted this year. Even with ongoing pressures, organizations must stay levelheaded and take a conservative approach that aligns with market conditions and is directed by clear business priorities. Its easy to forget that salary increase budgets are driven by several factors and, as such, should be viewed as one piece of a larger picture. With reliable market data that supports the critical and defensible decisions you must make. Our unique perspective allows us to see the critical intersections between talent, assets and ideas the dynamic formula that drives business performance. Looking at 2022, greater scrutiny on the labor market will continue among both employers and employees. Limit the Use of My Sensitive Personal Information. To address ongoing challenges, organizations are deciding how to focus their compensation spend for the greatest impact. The survey was conducted in October and November 2021. South African private-sector workers are set to receive an average pay rise of 5.5% in 2022, which is a cautious improvement over the 4.7% average increase paid this year, according to salary research from global advisory Willis Towers Watson. The United States is projecting an average increase of 4.6% in 2023, which is above the 2022 average actual increase of 4.2% - the highest since 2008 - and higher than 3.1% in 2021 and 3% in 2020. 2022 salary budgets: With worker shortages, why arent they higher? This is noteworthy, as it is above 2020s increase of 3.8%. It is important to take a total rewards perspective. By Kathryn Mayer. 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 2022 and beyond. Hatti Johansson Results from WTWs July global salary budget survey, By Thats almost a full percentage point higher. Our salary surveys provide robust, detailed salary data for all industries and countries, covering executives and employees at all levels. More than ever, making the most of your capital means solving a complex risk-and-return equation. Approximately 28,000 sets of responses were received from companies across more than 135 countries worldwide, and 1,550 organizations in the U.S. responded. After all, you cant respond to everything happening in the market, all at once. Also Read While countries where there is centralized union negotiations (e.g., Germany, Spain) or mandatory indexation (e.g. ARLINGTON, VA, November 17, 2022 Overall salary increases in the U.S. are forecast to rise to 4.6% in 2023, up from an actual spend of 4.2% this year, as the majority of companies react to inflationary pressures (77%) and concerns over the tighter labor market . In these cases, organizations are taking a range of actions, including more frequent pay increases, cost-of-living adjustments and even linking salaries and/or bonus payments to foreign currencies. Dallas, Texas, United States . They also would provide compensation professionals and organization leadership a greater understanding of whats needed for the coming year (which includes those one-time merit increases) as well as a real picture for overall salary movement. Click to return to the beginning of the menu or press escape to close. Going into 2022, workers' pay is all about supply and demandand inflation. The survey was conducted in October and November 2021. January 3, 2023. Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). However, companies in the Distribution, Health Care or Food Manufacturing businesses either kept salary budgets at 3% or perhaps even raised them. Copyright 2023 WTW. Salary increases in 2023 are projected to outpace 2022 pay raises but to trail inflation, new research shows, as insufficient pay raises drive employee turnover. Photo by Chris Welch / The Verge see the December . (EDGAR Online via COMTEX) -- ITEM 7. Step 3: Confirm contact preferences*. of respondents in the Willis . Limit the Use of My Sensitive Personal Information. | ARLINGTON, VA, July 20, 2021 Pay raises are making a comeback. Budgets in 2022 compared to 2021 ranged from 0.8 percentage points higher in Italy to 1.1 percentage points in Germany, to 1.4 percentage points in Spain. This makes it important for employers to highlight and communicate the full arsenal of rewards. 10% increase in the number of unique organizations participating in WTW's 2022 general industry surveys, and a 10% overall increase in data submissions. While salary budget projections may still be the best way to understand how others are setting salary budgets for the coming year, are they really the best barometer to reflect pay outcomes in times of extreme labor market changes? The 25% of organizations that update their salaries between June and December will be able to leverage the markets to determine their actions. Executives, management and professional . WTW Research Network Newsletter. 3.8%, 2008: 3.7%, 2009: 2.2%, 2010: 2.5%, 2011: 2.8%, 2012: 2.9%, 2013: 3%, Figure 1. Companies are now budgeting an overall average increase of 3.4% in 2022, compared with the average 3.0% increase they had budgeted in June 2021. They also are looking at how to focus their salary budgets for the greatest impact, with 2022 projections showing that 96% of companies globally will increase salaries and far fewer will implement salary freezes than in 2021 or 2020. More than ever, making the most of your capital means solving a complex risk-and-return equation. 2021 salary increases were notably softer than initially expected, with most markets dialing down their original forecasts to be more in line or slightly below 2020 salary budgets. Copyright 2023 Surperformance. Case in point: WTW's July 2022 Salary Budget Planning Survey results show that 96% of companies globally increased salaries (compared to 63% in 2020), and overall budgets have increased significantly over prior years.