US employers plan more modest compensation increases in 2024
Today, Mercer, a global leader in redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being, and a business of Marsh McLennan (NYSE: MMC), released the results of its August 2023 Mercer QuickPulse™ US Compensation Planning Survey. According to the survey, employers in the US plan to raise their compensation budgets by 3.5% for merit increases for 2024 and 3.9% for their total salary increase budgets for non-unionized employees. This compares to actual merit increases of 3.8% and 4.1% for total salary increase budgets for non-unionized employees in 2023.i
"While preliminary compensation budgets for 2024 are showing a slight decline, they remain well above pre-pandemic levels, reflecting the ongoing tightness of the labor market and low levels of unemployment. However, if the labor market continues to stabilize and inflation cools further as we move towards the end of the year, compensation pressures are likely to continue to decline. This could prompt further reductions in 2024 compensation increase budgets, as employers adjust their strategies to reflect the changing economic landscape," said Lauren Mason, Senior Principal, Career, Mercer.
Across industries, Healthcare Services are projecting 2024 budgets that lag other industries, with merit budgets of 3.1% and total increase budgets of 3.4%, as the industry continues to recover from the financial impact of the pandemic. Recent layoffs and financial strain on the high-tech industry also appear to be impacting merit budgets, with projected increases of 3.3%, a reversal of historical trends where high-tech typically led increases across industries. Several industries, including Energy and Consumer Goods, are planning merit budgets above the national average, projecting an increase of 3.7%.
The survey also found that employers are planning to promote less (8.7% of the employee population) and therefore will allocate less of their budget (1.1%) to promotional increases in 2024. In 2023, employers reported that they promoted 10.3% of their poulation, allocating 1.2% of their salary budget to do so.
Looking back at actual compensation increases over the last year, employer base salary levels increased 5.6%ii on average, despite 2023 merit increase budgets of 3.8%. This is a result of off-cycle pay increases which 59% of employers reported providing in 2023. The top reasons cited for off-cycle increases were to address retention concerns, counteroffers, market adjustments, and internal equity.
Ms. Mason continued, "As employers plan for 2024, it is crucial that they move away from the reactive approach of the past few years and adopt a more strategic approach. This will enable employers to focus their compensation investments on the most critical attraction and retention segments of their workforce, while also ensuring that pay increases are distributed fairly and equitably."
Note to editors:
Total increase budgets include other base pay increases such as promotional pay increases and cost of living adjustments, in addition to merit increases.
About Mercer's US Compensation Planning Survey
The August 2023 Mercer QuickPulse™ US Compensation Planning Survey includes data from more than 900 organizations in the US, from small employee bases (less than 500 employees) to very large employee bases (over 20,000 employees) across 15 industries. This study was fielded between July 31st - August 11th. You can review more of the survey findings here.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer's approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world's leading professional services firm in the areas of risk, strategy and people, with more than 85,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.
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