US salary budgets expected to remain the same in 2025

Although fewer organizations report difficulty with attraction and retention, salary increase budgets at U.S. companies are projected to remain at the same level as last year. While salary increase budgets are stabilizing, with 2025 planned increases projected to be 3.7% on average compared with the 3.8% average budget awarded in 2024, they remain higher than the pre-pandemic norm of 3%. This is according to the latest Salary Budget Planning Report by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company.

Despite a conservative outlook for 2025, salary increases remain at a healthy rate by historic standards and amid higher total payroll expenses (which include salaries, bonuses, variable pay and benefit costs). According to WTW’s survey findings, the average increase in payroll for respondents was 5.5% in 2024.

For those companies planning to reduce salary increase budgets, weaker financial results (36%) and cost management concerns (34%) were the most commonly cited reasons. For those planning to increase salary budgets, inflationary pressures (39%) and tight labor market concerns (31%) were the most common factors.

Steady and improved pay increases are indicative of organizations’ investment in talent. Overall, fewer organizations (36%) reported difficulty in attracting and retaining employees, down nine percentage points from last year and 17 percentage points from the prior year.

“Although salary is crucial for employees, other elements — such as healthcare and retirement benefits, new challenges, work flexibility and meaningful contributions — are significant as well. Companies should consistently evaluate their comprehensive offerings, focusing on workplace culture, communication, and a holistic approach to benefits and rewards,” stated Russ Wakelin, head of Global Product Development within Rewards Data Intelligence at WTW.

As organizations focus on their workforces, many have taken action to improve workplace culture in light of the current market conditions. For instance, more than half (54%) have placed broader emphasis on diversity, equity and inclusion, and just as many (53%) have taken steps to improve the employee experience. In addition, 48% are incorporating more workforce flexibility. More than half (52%) of organizations offer or are planning to offer the choice for remote, onsite or hybrid work arrangements.

“The U.S. labor market has stabilized because demand for talent dropped significantly from the prior three years. But supply has not changed, which is why the labor market still has vulnerabilities. Employers planning to lower salary increases closer to the 3% we saw for the decade before 2022 should understand that the competition for talent is still fairly strong, especially in certain industries. The focus should now be on retention, so spending the salary increase budget wisely to manage potential undesired attrition if demand was to pick up in 2025 is critical to future-proofing your workforce,” said Lori Wisper, global solutions leader, Work & Rewards, WTW.

About the survey

The Salary Budget Planning Report is compiled by WTW’s Rewards Data Intelligence practice. The survey was conducted between September and the end of October 2024. Over 37,000 responses were received from companies across over 150 countries worldwide. In the U.S. 2,002 organizations responded.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. 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.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you. Learn more at wtwco.com.

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