Employers anticipate salary budgets will grow at a near-record pace in 2025

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The labor line item could be increasing.

Employers expect base pay to increase 3.9% in 2025, marking a jump that’s “close to the fastest pace in two decades,” according to a new survey of 300 compensation leaders from the Conference Board.

While that’s slightly more than the 3.8% increase in 2024, though less than 2023’s 4.4%, it’s still a steady pace amid a tight labor market, the board noted. All in all, good news (for employees).

But why’s it happening now? “Despite a slower pace of hiring and slight increases in unemployment, elevated wages are expected to continue into 2025,” Dana Peterson, the Conference Board’s chief economist,, said in a statement tied to the survey. “A shrinking labor supply is driving businesses to focus on retaining their current workforce, leading to sustained salary increases and higher real wage growth as inflation moderates.”

Insurance, energy and agriculture, and communication companies reported the highest planned salary increases overall, while those in “trade and diversified services” had the lowest planned increases.

The bumps aren’t only appearing in paychecks, either. “To remain competitive and responsive to market dynamics, employers need to adjust their compensation strategies,” Diana Scott, leader of the Conference Board’s US human capital center, said in a statement. “Given fluctuating market conditions, leaders are increasing their use of compensation strategies that aren’t tied to base pay, like performance initiatives and other strategic priorities.”

But not everyone is: More companies expect to roll back their dependence on one-time bonuses, per the survey. Around 5% more organizations plan to end retention bonuses next year than those that expect to introduce them, and 3% more companies will discontinue sign-on bonuses compared to those that plan on instituting them.

“As pandemic job losses have recovered and employee turnover has slowed, the premium on these short-term incentives may be subsiding and giving way to more ongoing retention and talent priorities,” the board noted.