Companies are reducing pay raises in 2024 compared to the previous year, with about 47% of firms cutting their salary budgets. The median pay raise has decreased from 4.5% in 2023 to 4.1% in 2024, and projections for 2025 show a further decrease to 3.9%.
The labor market has significantly cooled, reflected by the drop in the number of employers struggling to attract and retain talent from 57% last year to 38% this year. Companies are aligning compensation strategies with business goals, focusing on bonuses, long-term incentives, and benefits. Total payroll expenses are still growing, with 73% indicating an increase over 2023 levels.
Pay equity remains important, and comprehensive compensation reviews are being undertaken. Despite the overall decline, wage growth remains higher than pre-pandemic levels. The Federal Reserve Bank of Atlanta noted a 4.7% wage growth in March 2024.
Employee expectations for pay continue to rise, with reservation wages hitting an all-time high of $81,822. Pay transparency is gaining traction, with 60% of organizations publishing salary ranges in job postings, up from 45% last year. Legislation on pay transparency is also expanding across several states.
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