A recent survey conducted by The Conference Board indicates that base salary budget increases for 2025 are projected to remain near their fastest pace in two decades. Employers report an average planned salary increase budget of 3.9% for the coming year, slightly higher than the 3.8% actual growth seen in 2024.
Dana M. Peterson, chief economist at The Conference Board, noted, "Despite a slower pace of hiring and slight increases in unemployment, elevated wages are expected to continue into 2025." She attributes this trend to a shrinking labor supply prompting businesses to focus on retaining their current workforce.
Diana Scott, leader of the U.S. Human Capital Center at The Conference Board, emphasized the need for employers to adjust compensation strategies to stay competitive. "Given fluctuating market conditions, leaders are increasing their use of compensation strategies that aren’t tied to base pay," she stated.
The report surveyed 300 compensation leaders and highlighted several key findings. It noted that companies in insurance, energy/agriculture, and communications sectors report the highest planned overall increases for 2025. Conversely, trade and diversified services sectors plan the lowest increases.
Additionally, while sign-on and retention bonuses remain common amid a tight labor market, there is a growing trend towards reducing reliance on these one-time incentives. Instead, recognition programs and equity compensation are gaining momentum with nearly 14% growth anticipated in recognition initiatives and 6% growth in equity compensation.
Organizations also expect increased utilization of budgets for promotions and responses to external market pressures among other strategic priorities. Pay equity remains a significant focus with executives planning to fund pay equity increases through existing merit and general budgets rather than separate allocations.
