US companies plan for record pay increases in 2023, survey shows

Employers plan to increase their wage budgets by 4.6% next year, the biggest expected annual jump in 15 years.

That’s according to the latest international survey by consulting firm Willis Towers Watson, which included responses from 1,550 US employers. The survey was conducted from October 3 to November 4. The vast majority of organizations attributed the decision to rising inflation and the tight job market.

But with nominal inflation still at 7.7%, any raise an employee receives below these levels effectively means he earns less because his paycheck won’t buy as much.

Often, what companies expect to pay more in a given year and what they end up paying differs based on market conditions. This year, for example, 70% of organizations surveyed by Willis Towers Watson said they spent more than they originally planned. Overall, employers ended up spending 4.2% more on salaries this year than they did in 2021.

Employers indicated they will use a variety of ways to fund larger pay increases in the coming year: 21% said they would reassess their total rewards package to ensure it has the greatest impact on retention and engagement; 17% said raising prices; and 12% said they restructure and reduce staff.

How employers will distribute the additional wage funding will not be uniform.

Some workers will have readjustments much higher than average. This will depend on a number of factors such as employee performance and the prevailing market rate for a position, which may require upward adjustments to existing staff. New pay transparency laws will increase pressure to deliver these adjustments.

And, as always, those whose skills are most in demand are likely to see the biggest pay increases, said Carolina Valencia, vice president of human resources at Gartner.

“Certain jobs will receive a disproportionate share [do aumento do orçamento salarial] because they are critical or difficult to hire.”

Gartner expects even bigger salary increases next year. Its survey of employers, conducted in September and October, found that organizations in North America expect to offer merit raises of 7% on average.