US salary increase budgets hit highest level since 2001

“Pre-pandemic” was the word of choice in many recent earnings calls, used to signify that things are actually going pretty well for some companies. And now, that same metric has hit salary increases.

In the first half of 2023, orgs budgeted for more salary increases or the total pool of money dedicated to base pay increases, than before the pandemic, according to the latest Conference Board survey, which tracks how much companies plan to increase salaries and bonuses. More than 400 organizations completed the survey in June and July.

The 4.4% jump in 2023 salary increase budgets was the highest since 2001, per the survey. (And can we just say: 2001 is ultra pre-pandemic.)

The survey’s authors noted that 2023 was “a challenging year” for employee retention and recruitment, “as labor markets remained very tight.” As a result, companies “needed to raise their salary increase budgets” simply to stay competitive, they pointed out.

The Conference Board predicted that budgets will stay high throughout 2024, rising 4.1% on average. While that’s a slight dip from 2023, it’s still a significant hike from pre-pandemic increases, according to the survey.

It’s a slightly different story for wage growth. The Conference Board forecast that in 2024, “wage growth will continue decelerating but remain above pre-pandemic levels.” And it anticipated that GDP growth becoming negative turn next year, sparking a “short and shallow recession.”

“As a result, fewer companies will expand their workforce, yielding less competition for workers and reduced pressure to increase wages compared to the last three years,” the survey’s authors noted.

Still, employers will likely get creative and “continue using other levers to address recruitment and retention challenges” next year, according to the authors. Beyond base pay increases, “survey respondents report[ed] they plan to use sign-on bonuses and retention rewards, albeit at a reduced rate” to help deliver “competitive compensation.”

The survey’s authors note that some employers are even “taking special actions, such as accelerating the timing of raises and adding off-cycle increases,” while others, “possibly expecting financial challenges ahead,” are “controlling costs by delaying the effective date of planned increases.”

But nothing is truly set in stone for 2024. Notably, 59% of survey respondents said that their organizations didn’t yet have a firm salary increase budget for next year.