As you’re looking at creating salary budgets for next year, you should know what your peers are planning so your company can stay competitive in the war for talent.
New research shows that nearly half of employers plan to increase their salary budgets for 2023, and that’s backed up by several surveys and analyses.
Latest data on salary budgets
About 48% of companies will have higher or significantly higher salary budgets next year, according to Salary.com’s Annual National Salary Budget Survey. Only about 14% plan to have a lower or significantly lower salary budget in 2023 than they did this year. The remaining companies said their budgets would stay the same.
The amount of these raises will be higher, too. In fact, the median raise projected for these employers is 4%, an increase from the traditional 2.5%-3% raise. A quarter of employers plan to be even more generous, offering employees raises in the range of 5%-7% in 2023.
Plus, a good number of employees ended up giving employees larger raises than they anticipated in 2022. Over 20% of companies gave workers raises between 4%-5% this year, while only 12% had planned to do so.
Cost of living increases were also more generous in 2022 compared to previous years. Average increases were slightly above 2%, likely influenced by historic rates of inflation (though the current inflation rate sits at 8.5%).
Small businesses with under 500 full-time employees were more likely to give their employees cost of living raises than larger companies. Typically, they gave workers cost of living increases between 2.5% and 2.7%, while larger businesses gave employees an average of 2%.
A survey published earlier this summer by WorldatWork also shows that employers are planning to increase salary budgets for 2023. U.S. employers said their budgets would be increasing by about 4% compared to 2022 figures.
Similar data was uncovered from a WTW (Willis Towers Watson) analysis on trends in employee pay. Companies in the U.S. projected an average increase of 4.1% to their salary budgets in 2023, and globally, the 15 largest economies predict they’ll raise their salary budgets by an average of nearly 5% next year.
How Finance leaders should proceed
With all this data suggesting a big trend toward pay increases for employees, you may want to take a second look at what you’re planning for your salary budget next year.
Work with HR to determine your compensation and workforce goals for 2023. Will your focus mostly be on retaining employees, attracting new hires or correcting any existing salary discrepancies in your company? You’ll need to lay out your specific priorities, then set salary budgets accordingly.
Also, you may want to ask HR to do some research on the average salaries that employees with similar titles and job responsibilities are currently receiving from the competition. That way, you’ll have an idea of what you’re up against and can account for that when crafting next year’s salary budget.