Base salary budget increases are projected to continue in 2025, close to the fastest pace in two decades, according to a Sept. 8 report from The Conference Board.
Employers reported planned salary increase budgets of 3.9%, which is slightly higher than the actual growth of 3.8% in 2024, the report showed.
“Despite a slower pace of hiring and slight increases in unemployment, elevated wages are expected to continue into 2025,” Dana Peterson, chief economist at The Conference Board, said in a statement. “A shrinking labor supply is driving businesses to focus on retaining their current workforce, leading to sustained salary increases and higher real wage growth as inflation moderates.”
In a survey of 300 compensation leaders, most companies said they’ll continue one-time bonuses such as sign-on and retention bonuses. However, a growing number said they’re planning to reduce these strategies moving forward.
For instance, about 5% more organizations plan to discontinue retention bonuses than introduce them in 2025. In addition, 3% more organizations plan to stop offering sign-on bonuses than introduce them in 2025.
Other reports indicate raises may not be as high. According to a Payscale survey, U.S. employers are planning for 3.5% raises for 2025 — though these also range from about 3% to 4.5%, depending on industry. This projection follows a pattern of “softening in a cooler labor market,” Payscale said, with actual salary increase rates at 4% in 2023 and 3.6% in 2024.
And though the economy may be in flux, workers still expect competitive pay, according to a separate Payscale report. Transparent pay practices and meaningful raises can help attract and retain talent, yet many organizations aren’t keeping up with these best practices, the report found.
Notably, leaders told The Conference Board they plan to increase budgets for promotions, responses to external market pressures, increases for salary range minimums, changes to role responsibilities and salary increases for key contributors.
Recognition programs and equity compensation initiatives are gaining momentum, as well, leaders said in the survey. Overall, employers’ 2025 plans indicate about 14% growth in the number of companies who plan to use recognition programs and 6% growth in equity compensation.