With 2024 in full swing, employers are starting to plan for employee salary increases this year. While economic concerns have prompted some employers to take a more conservative approach with compensation compared to 2023, the consensus remains positive for employees. Research shows that U.S. employers are expected to provide an average salary increase of four percent in 2024. Although this is slightly lower than the previous year’s increase, it is still significantly higher than salary budgets in recent years.
Factors Influencing Salary Increase Strategies
There are two key factors driving employers’ decisions regarding salary increases in 2024. The first is high inflation, which has led to steep prices for essential goods and services such as food, housing, and health care. It now requires $119.27 to buy the same goods and services a family could afford for $100 before the pandemic. Although inflation has decreased minimally since reaching a 40-year high in the summer, workers continue to struggle with the rising cost of living. The second factor is the tight job market, which has increased competition for talent. To attract and retain skilled employees, employers must offer competitive pay to combat the increasing prices.
The Impact Of Inflation
Even though inflation has eased somewhat, its effects continue to be felt by employees. A recent survey showed that months of high living costs have pushed employee financial well-being to an all-time low. Workers are burdened with credit card debt, and many find it challenging to save for retirement due to inflation pressures. Employers recognize this and have responded by increasing salary budgets. Surveyed employers cited inflation as the primary reason for the salary increases planned for 2024.
In addition, voluntary turnover and attrition rates are at 11% overall, indicating the importance of offering competitive compensation packages. However, this survey revealed that fewer organizations report difficulties finding and retaining workers compared to previous years, suggesting a slight improvement in the labor market.
Employers’ Strategies Beyond Salary Increases
In addition to salary bumps, employers are adopting various strategies to attract and retain talent. 58% of employers are embracing workplace flexibility, recognizing the importance of work-life balance for employees. Furthermore, 59% of employers are placing a greater emphasis on inclusion, equity, and diversity, acknowledging the need for a diverse and inclusive workforce. In response to these ongoing pressures, organizations are taking the following actions:
- 50% of respondents have reviewed the compensation of specific employee groups
- 43% are increasing starting salary ranges
- 42% are reviewing the compensation of all employees
- 40% are enhancing the use of retention bonuses or spot awards
- 36% are increasing training opportunities
These efforts reflect a commitment to creating a positive and rewarding working environment in the face of economic challenges.
In Times Of Uncertainty, Partner With A PEO
For small business owners, staying informed about salary trends and the challenges employees face in the current economic climate is crucial. By understanding the impact of inflation and the tight labor market, small business owners can make strategic decisions regarding salary increases and employee retention. Or you can partner with a professional employer organization (PEO) with experts to help you every step of the way, including answering questions and concerns about employee compensation and benefits.
GMS, a certified PEO (CPEO), helps small businesses navigate the complexities of salary planning, ensuring competitive pay for employees while managing costs effectively. In addition, we provide access to resources and tools to support recruitment, compliance with employment regulations, and more. Partner with us so you can focus on what you do best – growing your business. Start the new year off on the right foot and partner with GMS. Get a quote from us today!