Preliminary 2024 Salary Budget Increase Projections
August 24, 2023
By: Lauren E. B. Belcher
Although WorldatWork’s anticipated annual salary budget survey has yet to be published at the time of this writing, we are beginning to see several preliminary predictions for salary budget increases, across many sources.
Among these preliminary reports, the consensus for 2024 salary budget increase projections appears to be around 3.8 – 4.0 percent overall. With 2023’s actual average budget at around 4.4 percent, the 2024 projections are approximately 0.5 percent lower.
Payscale, who conducts their own annual salary budget survey, reports an average projection for 2024 pay increases of 3.8 percent with some states and industries expecting increases above the 3.8 percent projection. Additionally, Payscale reports that over half of employers are expected to increase or maintain their salary budget going into 2024. However, according to the Society for Human Resource Management (SHRM), one-fifth of organizations are planning to lower their increase budgets.
Willis Towers Watson (WTW) predicts salary budget increases to be around 4.0 percent based on information garnered from their most current salary budget planning survey. This projection is down by one-tenth of a percent from the 4.1 percent projection in 2023; yet it is still above pre-pandemic levels. (WTW/SHRM)
Additionally, SHRM reports that employee expectations are on the rise with many expecting more pay due to inflation and the constricted labor market. According to an ADP Research Institute survey (SHRM), many of those employees are prepared to leave if they do not receive the expected pay.
A pay equity strategist for Payscale reported to SHRM that watching wage growth trends and investment in up-to-date market data will be paramount to organizations looking to ensure fair pay and marketplace competitiveness.
Major economic indicators, including the labor market and inflation, seem to be driving the 2024 increase projections. Though still significant, inflation has been on a steady decline after hitting a 40-year record high of 9.1 percent in June 2022. As of July 2023, the inflation rate was 3.2 percent. However, despite the inflation decrease, the labor market remains tight, forcing employers to consider higher pay increases to retain employees.
According to the United States Bureau of Labor Statistics (BLS), as of July 2023, the unemployment rate was 3.5 percent, while total non-farm payroll employment increased by 187,000. Industries that saw the highest employment gains include health care, financial, wholesale trade, and social assistance organizations. (BLS)
BLS reports a 3.2 percent increase, overall, to the Consumer Price Index (CPI) from July 2022 to July 2023 – a vastly different view than July 2021 to July 2022 when we saw an 8.5 percent increase to CPI overall. The Kiplinger Letter predicts that inflation will likely rise to 4.2 percent by December 2023.
When the current and predicted economic factors are considered, the slight decrease and the attitude surrounding 2024’s salary budget increase projections are plausible.
As organizations continue to deal with the wavering rates of inflation and tight labor market, it will be important to consider economic factors and their effect on employee retention and cost of labor when budgeting for salary increases in 2024.
