Rapid rise in budgets combined with volatile economy will 'challenge HR pros to leverage data and think strategically,' says expert
Budgets for salary increases in 2023 have surged to their highest amount in two decades, according to a new survey from WorldAtWork, putting more pressure for HR leaders coming up with compensation budgets amid an uncertain economic environment.
The organisation said the results, garnered from over 6,500 unique responses, is a "surprising deviation from last year's predictions."
Among the 18 markets surveyed, India showed the largest salary increase budget with an average of 9.8%. This is slightly lower than the 10.1% recorded in 2022, but is closer to a pre-pandemic level of 9.9%.
The survey found U.S. employers are budgeting an average increase of 4% in 2024. Though down from the actual increase of 4.4% in 2023, the number remains higher than the 3.1% salary increase budget in 2021 and years prior, said WorldatWork.
The United Kingdom also saw its salary increase budget hit 4.5%, surpassing the projected 3.9%.
Sue Holloway, Director, WorldatWork, said the results should make organisations more strategic as they come up with their compensation budgets next year.
"The rapid rise in salary increase budgets over the past couple of years, combined with today's volatile economic environment, challenge HR pros to leverage data and think strategically as they formulate 2024 compensation budget recommendations and negotiate with CFOs," Holloway said in a media release.
Layoffs less likely in 2024
The report also found that about 70% of respondents did not report any layoffs for 2023 after years of retrenchments across the world because of the pandemic and economic uncertainty.
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The likelihood of layoffs is also expected to decrease in 2024, with 91% of WorldAtWork's respondents not expecting any reduction in their workforce in the coming year.
WorldAtWork's Salary Budget Survey is now in its 50th year and regarded as the longest-running survey of its kind.
"Organizations of all kinds, from government entities to global multi-nationals to modest enterprises, rely on this annual survey to benchmark and plan salary increase budgets to maintain the workforces they need," Holloway said.