The Talent Competition: Salary Increases In 2023 & 2024

The latest Salary Budget Planning Survey by globally operating brokerage company and advisory firm WTW indicates that the labor market remains considerably hot and that the majority of companies will be offering substantial pay raises in line with last year’s figures.

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According to the survey, the top two factors that are leading businesses to make changes in their salary, wage, and benefits strategies in 2023 are inflation and a particularly tight labor market, with 61% and 60% of the respondent vote, respectively, though the labor market and especially inflation have calmed in recent months. Some of the other top reasons that employers have been making compensation adjustments include cost management, worse-than-expected financial performance, and in anticipation of economic downturn. 

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Despite the more than 50% of survey respondents that reported having trouble attracting and retaining talent over the last year, there is a great deal of optimism on that front with regard to 2024, with just over one-third (35%) expecting those difficulties to extend into the next calendar year. It’s also worth noting that the percentage of respondents currently experiencing or having recently experienced attraction and retention problems, while still a majority, is trending downward slightly from last year. 

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In light of the hot talent market as it currently exists however, most companies have been making strategic shifts in their compensation packages and benefits offerings in order to remain competitive and keep key staff onboard. To achieve those ends, about half of all respondents reported having reviewed compensation and bonuses for entire subsets of employees (i.e. those groups with skill sets that are especially competitive in the labor market). Further, a substantial portion of respondents have taken other similar measures as well, including raising starting salary rates for new hires and increasing spot and loyalty rewards.

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In practical terms of as for how those compensation adjustments are playing out, 2023 has seen an average 4.4% increase in wages, which is significantly up from the average 3.1% increase reported in 2021. That said, survey forecasts are expecting a slightly lower increase of 4% in 2024, so there does appear to be some ebbing here, though the vast majority of employers (70%) still anticipate pay raises next year to be at or above the same level as this year, while just 14% are budgeting for lower year-to-year pay raises.

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It’s also worth noting that more and more employers are utilizing a strategic approach to funding these larger compensation figures via total rewards optimization, with twice as many employers going this route as of the most recent survey compared to the prior year’s survey. 

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Beyond simply adjusting compensation figures, many employers are also incorporating other talent initiatives into their attraction and retention efforts, including emphasizing diversity, equity, and inclusion; allowing employees greater schedule flexibility; boosting health and wellness offerings, optimizing bonus and reward systems, offering additional training and experience opportunities, and making other changes specifically designed to improve the quality of the employee experience with the company. 

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You can read more about this research and analysis here.