As the economic landscape continues to evolve, employees may need to adjust their salary expectations for the year 2024. According to surveys conducted by Aon Plc and Mercer, companies are set to tighten their budgets, resulting in potentially smaller merit-based salary increases for workers.
US employers, surveyed by Aon Plc, which compiles compensation data from over 5,500 employers, have indicated that merit raises are likely to average approximately 3.7% across all industries in 2024. This is a slight decrease from the 3.9% seen in 2023. The decision to curb labor budgets and the easing of inflation from the previous year’s highs have contributed to this shift. A separate survey by workplace consultant Mercer also aligns with this trend, with merit-based salaries expected to rise by 3.5% in 2024, down from 3.9% in 2023.
Tim Brown, a partner at Aon, notes that there are multiple factors at play, stating, “People are not going to spend what they spent last year. Also, inflation has come down since last year. So there’s more pressure on salaries.”
Leaders in the workforce echo these findings. Bob Toohey, Chief Human Resources Officer at Allstate Insurance Co., anticipates that compensation budgets in the US “will be lower than last year – all company budgets will be lower than last year.”
Despite the projected dip in salary increases, the figures remain significantly higher than pre-pandemic levels when annual raises hovered around 3%. This is attributed to the resilience of the labor market and historically low unemployment rates.
According to Mercer Senior Principal Lauren Mason, the labor market’s continued strength and low initial jobless claims, which recently approached record lows, contribute to this trend.
Furthermore, US inflation, which reached over 9% in the previous summer, has since decreased to less than half of that figure.
However, it’s important to note that further reductions in compensation budgets may be on the horizon as companies adapt to the evolving economic landscape.
Notably, the technology sector has experienced significant changes, with only 5% of firms now aggressively hiring, down from 22% in the previous year. This has impacted projected salary increases in the tech industry, which are expected to be just 3.3% next year, according to Mercer. This figure falls below sectors like energy and consumer goods.
Additionally, specialized roles in technology, such as machine learning engineers and data scientists, remain in high demand despite the overall slowdown in the industry.
Salary increases tied to promotions are also anticipated to decelerate in 2024, as companies plan to promote fewer employees. During the hiring boom of 2021 and 2022, many firms granted raises and promotions to retain top talent, even mid-year.
However, this trend is expected to shift, as indicated by a survey from workplace consultant Willis Towers Watson.
In summary, while salary raises may not be as generous as in recent years, companies are increasingly focusing on enhancing employee perks and benefits, such as flexible work schedules and paid parental leave, according to a survey conducted by staffing firm Robert Half Inc.