Employees in the U.S. can look forward to their pay raises in 2024 as reports and predictions begin to come in. Mercer released its Mercer QuickPulse US Compensation Planning Survey of August 2023, and details of the compensation increase next year are now available. The preliminary compensation budgets for 2024 appear to be on decline but the numbers are still higher than those before the COVID-19 pandemic, according to Lauren Mason from Mercer.
Aggressive pay raises in 2024 still seem imminent but the compensation numbers are slowing down from last year. (Image Courtesy – Freepik)
85 percent of respondents of the survey clarified that the compensation budgets are only in the initial stages of planning and the final numbers will only be out in December when the October report is published. However, employees should still see pay raises in 2024 as the numbers are unlikely to change very drastically. Let’s take a look at the report.
Compensation Budget Details: Pay Raises in 2024
According to the Mercer report, the compensation budget for next year is projecting a decrease in the average budget for the annual merit and total increase as compared to the numbers we had this year, in 2023. Employers are estimating a 3.5 percent merit increase in 2024, as opposed to the 3.8 percent raise in 2023. In terms of total increase, there is a 3.9 percent prediction, lower than the 4.1 percent number in 2023.
Mercer also highlights the status of the labor market and what it will mean for the pay raises in 2024. With the labor market still unbalanced and employment rates on the lower side, employers are willing to raise salaries to retain their workers. There appears to be a 3 million worker gap in the labor force as job openings go unanswered. Before the pandemic, the number was at 1 million—still extreme but a lot more manageable. The market does indicate that it is stabilizing to an extent, which by the end of the year may mean a decline in the compensation increase next year.
While it is certain that employers will raise salaries to a degree, factors leading to the limitation in the compensation budget for compensation increase next year include economic uncertainty, company financial performance, pay levels already exceeding the market, and other miscellaneous factors. There are some chances that the pay raise in 2024 could show off-cycle pay increases such as the 5.6 percent salary raises many employees saw this year, but an increase will only be apparent as the year progresses.
Other Compensation Budget Updates
The predictions for pay raises in 2024 will affect each industry differently. Mercer’s data shows healthcare services will be the most reluctant to raise salaries, at a 3.1 percent average. High tech and other manufacturing should also be on the lower end of the spectrum, while the energy industry, insurance industry, and consumer goods’ compensation increase next year should be above the national average, at 3.7 percent.
Aside from the Mercer report, the federal pay raises in 2024 were also announced in August. According to the alternative pay plan by the current government, federal employees on the General Schedule should receive an average 5.2 percent pay raise next year, effective starting 1 January. Federal News Network reports that this should be the biggest pay boost for federal employees since the Carter administration’s 9.1 percent raise in salaries in 1980.
Apart from predictions of compensation budget increases next year, Mercer also reported that employers were scaling down on planned promotions for 2024. 8.7 percent of employees might see promotions, as compared to the 10.4 percent predicted for 2023.
The Mercer report clearly indicates how the workforce pay raises for 2024 are shaping up and the compensation increase next year might be something to look forward to. But while this would benefit individuals, it would also imply that the economy and labor force have not stabilized. The next report in December should see a lot more businesses more certain about their predictions as only 5 percent of the compensation budgets have been approved by leadership already. This will give each industry a more concrete grasp on what to expect for the upcoming year.
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