Budgets for employee salary increases have grown by an average of 4.4% in 2023, the highest increase in more than two decades, according to a survey conducted by The Conference Board. The survey also found that companies are forecasting another 4.1% increase in 2024. The increase in 2023 is the largest since 2001. The survey defines a salary increase budget as the pool of money dedicated to base pay increases for the year. The survey also revealed that optimism about the U.S. economy among CPA decision-makers has doubled from the previous quarter. The top challenge facing organizations is the availability of skilled personnel. Accounting firms must provide various HR functions to stay competitive in the talent game. A survey of 33,000 employers conducted in December 2023 projects that salary increases in the U.S. will remain high in 2024, with an average increase of 4.1%. This is slightly lower than the 4.4% increase in 2023 but still higher than previous years. The main drivers behind the salary increase budgets are inflationary pressures and concerns over a tight labor market. Employers are focused on retaining talent and recognize that pay is a key factor in remaining competitive. However, there are signs that the domestic economy is slowing, with the Federal Reserve's tightening campaign coming to an end. The Fed is expected to keep its benchmark lending rate steady at 5.25%-5.50% as it evaluates the effects of previous monetary tightening. The survey also found that employers are planning smaller salary raises in 2024 compared to 2023, and further reductions may occur if economic conditions worsen. Raises in 2024 are expected to be less than in 2023, with most employers planning to increase salaries by an average of 4%. This is a slight decrease from the average raise in 2023 at about 4.3%. Inflation is still high, and everyday living costs have increased. The Federal Reserve Bank of St. Louis projects inflation to fall below 2.5% in 2024. While a 4% raise may not seem like much, it will give workers a bigger boost in purchasing power compared to raises in 2021 and 2022. Raises will vary across industries, with the energy and utilities, engineering and science, and technology sectors projected to offer higher raises than manufacturing, retail and customer service, and education. Employers are offering higher raises to compete for talent in a tighter labor market and to comply with legislation requiring salary transparency. Workers are encouraged to advocate for themselves and ask for the raise they want. American employers plan to give their workers close to 4 percent in salary increases in 2024, according to Payscale's Salary Budget Survey. The planned paycheck bumps of 3.8 percent are slightly lower than last year's. Wage growth in the U.S. has been decelerating after the post-pandemic economic reopenings. Recent data shows that the labor market is cooling with companies slowing down hiring. Private sector employers added 164,000 jobs in December and annual pay grew by 5.4 percent for the year. Job changers saw their pay rising by 8 percent for the year. Payscale predicts that pay increases will remain strong in 2024, but will vary by industry and business performance. U.S. companies plan to reduce average raises for workers in 2024 due to a cooler job market. In 2023, companies gave salary increases of 4.4%, but in 2024, the average increase will be 4%. Similarly, total salary budgets for raises and promotions will be 4.1% in 2023, but will decrease to 3.8% in 2024. The job market has cooled down from the high demand in 2021 and 2022, when businesses increased pay significantly to attract talent. The demand for labor exploded in 2021, but the labor supply was limited. Workers had the luxury of easily quitting their jobs and finding new ones with higher pay. However, the job market has slowed down, and companies now need to balance their pay increases to remain competitive without overextending their budgets. The current forecast of 4% raises in 2024 is still higher than the average of 3% raises following the 2008 financial crisis.
The average cash bonus paid to US employees last month was $2,145, down 21% from the previous year, according to payroll software company Gusto. Every industry posted a decline, ranging from 3.8% for technology firms to 36% for tourism and transportation companies. Sixteen out of the 22 industries tracked by Gusto saw declines in the share of workers who received any sort of bonus. Several factors drove the decline, including businesses not hiring as aggressively as they were a year ago and workers being less confident in their ability to find other jobs. The biggest payouts went to finance workers, with an average bonus of $13,255. Bonuses in the tech sector dropped, on average, $672 from 2021. Merit-based salary increases will also see slower growth this year at larger employers.
In Nigeria, BUA Group, a major conglomerate, has announced a 50% salary increment for its staff, effective from February 1, 2024. The decision was made by the Chairman of BUA Group, Abdul Samad Rabiu, to mitigate the impact of the economic hardship currently being faced in the country. The increment will cover both permanent/regular and non-permanent staff, and the human resources and finance departments are processing the increase to ensure it is captured in the February 2024 payroll. This announcement comes at a time when negotiations are ongoing between organized labor and the government for a new minimum wage [90665c3a].
New labor market data reveals that job seekers' salary expectations have risen significantly. The lowest average wage respondents would be willing to accept for a new job is $81,822, up from $73,391 in November 2023. The increase in pay expectations puts pressure on employers' compensation levers and increases the chances of exacerbating pay inequity. To proceed with pay equity in mind, organizations should maintain core principles, conduct more frequent pay equity analysis, ensure organizational buy-in, and leverage pay equity software. Pay equity software expedites the process of adapting to dynamic external and internal factors that influence wages. [1f290a9a]
