Large US corporations are projecting an average increase in their base pay budgets of 3.9% for next year, according to a survey of 300 compensation leaders across 11 major industries from The Conference Board. This is slightly lower than the 4.4% average increase in 2023 but higher than the 3.8% bump companies were paying out this year. These base pay budget increases are seen as a proxy for the average raises employees may receive. Despite a slower pace of hiring and slight increases in unemployment, elevated wages are expected to continue into 2025 as businesses focus on retaining their current workforce.
To help retain critical talent, respondents indicated that they plan to utilize more of their pay increase budget throughout the year for promotions, to remain competitive based on market pressures, to bring pay up to minimum salary ranges, and to recognize changes in role responsibilities. Pay equity has also become a focus due to new state and local pay transparency laws, with pay transparency and retention influencing total compensation strategies. Compensation leaders also mentioned their intent to continue using non-base-pay strategies to increase overall compensation, such as various types of bonuses, but noted they will rely less on retention and sign-on bonuses compared to during the pandemic.
Overall, the survey found that compensation leaders in the insurance, energy/agriculture, and communications industries reported the highest planned overall increases, while those in trade and diversified services companies reported the lowest. Different salary surveys may vary in their projections, depending on the range of employers surveyed, and these projections are subject to change based on economic and business conditions. Nonetheless, the focus on retaining talent, ensuring pay equity, and using various strategies to increase overall compensation remains prevalent among large US corporations.
The respondents to the survey mainly came from larger US multinationals, with nearly 80% of the businesses generating over $1 billion in revenue and close to half of the respondents working at companies with at least 10,000 employees. The Conference Board emphasized the importance of addressing retention and pay equity within organizations, driven by legal requirements and new mandates, which are influencing total compensation strategies. While the use of non-base-pay strategies to increase overall compensation remains a priority, companies are shifting away from relying heavily on retention and sign-on bonuses.
Moving into 2025, businesses are focused on retaining their current workforce through sustained salary increases and higher real wage growth as inflation moderates. This reflects a trend towards addressing pay equity, utilizing pay increase budgets for various reasons such as promotions and market competitiveness, and continuing to adjust compensation strategies to meet evolving demands. As salary surveys continue to be released and projections may vary, the emphasis remains on adapting to changing economic and business conditions while prioritizing talent retention and equitable pay practices.
