Tight labor markets, inflationary pressures and employee retention concerns fueled salary increases to rates not seen in nearly two decades. Of the organizations that reported higher 2022 projections at the end of the year, the average total increase was about 3.7% (compared to 2.9% for 2021 for the same group of companies). Given ongoing uncertainties and the growing threat of a recession, it is important for compensation and HR professionals to thoughtfully balance the demand for higher salaries to address inflationary pressures and labor market challenges against the risk of increased and permanent cost structures. This is after recording an actual average pay increase of 4.62% in 2021. Organizations in smaller economies shared a similar fate, mostly averaging similar salary budgets in 2021 when compared to 2020. All rights reserved. Click to return to the beginning of the menu or press escape to close. Sources: 1990-1994 Data: American Compensation Association Salary Budget Survey. The United States is projecting an average increase of 3.4% compared to 3.1% in 2021 and 3% in 2020, which is the highest since 2008. However, roughly one-third of participants have revised their 2022 projections upward and the 2022 average projected increase (as . Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. Or they can utilize all of these options, especially with millions of Americans quitting their jobs, changing careers or postponing looking for employment.. Finally, remember other payments you may have made during the year retention bonuses or recognition awards. For some companies, that kind of increase represents millions in investment. Case in point: WTWs July 2022 Salary Budget Planning Survey results show that 96% of companies globally increased salaries (compared to 63% in 2020), and overall budgets have increased significantly over prior years. Though employees want higher wages to mitigate the cost of living, as organizations prepare for 2023 they need to balance cost management with employee attraction and retention efforts by taking multiple actions to keep employees and those actions must go beyond pay increases alone. Industrial manufacturing: 2.6% to 3.4%. All rights reserved. Dont just focus on base salary adjustments. Budgets in 2022 compared to 2021 ranged from 0.8 percentage points higher in Italy to 1.1 percentage points in Germany, to 1.4 percentage points in Spain. For those having this debate, here are a few considerations: Making salary decisions can be challenging when topics like inflation, labor shortages and wage increases are creating a stir in headlines. managing director of work and rewards at consultancy Willis Towers Watson in Irvine, Calif. . The UK has . According to the survey, employer concerns over their ability to hire and retain talent far outweighed other factors for boosting salary increases. Copyright 2023 WTW. Prioritizing and segmenting increases is vital for an appropriate return on investment. Then change arrived with a vengeance in 2022. Average US Pay Increase Projected . The highest increases forecasted are in India (10.0%), Russia (8.6%), Brazil (7.5%), Mexico (6.4%) and China (6.0%). Working shoulder to shoulder with our clients, we uncover opportunities for sustainable successand provide perspective that moves you. Facing ongoing business and economic conditions in 2022, organizations around the world have been forced to stay current with whats happening in the employee marketplace and how that affects pay and then adapt accordingly. While there typically is some discussion on what drives annual salary budget projections (AKA merit budgets) every year, 2021 felt different. We saw only moderate changes in 2021 salary budget projections when employers were planning for 2022. Companies are budgeting an overall average increase of 4.1 percent for 2023 Tight labor market drives U.S. employers to boost 2023 pay raises 2022 Salary Budget Planning Report - Global (July . EMPLOYERS in the Asia-Pacific plan to give the highest 2022 salary increases compared with North America and Western Europe, which are expected to stay flat, according to findings from a Willis Towers Watson survey. One in three employers bumped up original salary increase projections. Even the 1.0% jump we saw from 2021 to 2022 is significant in terms of organizations total spend on compensation. Much has been written about The Great Resignation, but it appears that workers do have more leverage to demand higher pay and benefits (as well as more flexibility) than ever before. Canadian companies plan to give employees larger raises next year as they recover from the economic fallout from the pandemic and face mounting challenges attracting and retaining employees, according to a new survey by Willis Towers Watson (NASDAQ: WLTW), a leading global . Bonuses for support staff and production and manual labor employees averaged 8.0% and 5.5%, respectively. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. This feels comparatively low especially if you look back at April 2020 when unemployment spiked at 14.8%. This translates to . 2021.Last Update: May 30, 2022. are making to help attract and retain employees is boosting salary increase budgets for 2022. . More than ever, making the most of your capital means solving a complex risk-and-return equation. More than ever, making the most of your capital means solving a complex risk-and-return equation. ARLINGTON, VA, January 13, 2022 - Fueled by tight labor markets, U.S. employers are boosting their original salary increase projections for 2022 as the Great Resignation shows no signs of abating. It also shrank 10.6% among the historical leadership talent pool (workers ages 45-54). The Salary Budget Planning Report is compiled by WTWs Data Services practice. Most (if any) of these are not factored into a merit budget or the data reported for salary budget projections. Even with this lag, it would be natural to expect greater movement than the 2022 median projections of roughly the same 3% theyve been for so long, but that hasnt happened. The 15 largest economies are forecasting an average increase of 4.9% in 2023, which is 0.9 percentage points higher than the 4% actual increase in 2021 and aligned with the 4.9% average increase granted in 2022. Salary increases in 2023 are projected to outpace 2022 pay raises but to trail inflation, new research shows, as insufficient pay raises drive employee turnover. ARLINGTON, VA, January 13, 2022 - Fueled by tight labor markets, U.S. employers are boosting their original salary increase projections for 2022 as the Great Resignation shows no signs of abating. Winning the talent race will require employers to continue to be creative and comprehensive with their Total Rewards strategy," said Lesli Jennings, senior director, Work & Rewards, WTW. For example, Indias salary budgets continued climbing from 8.2% in 2020 to 8.7% in 2021 and finally 9.9% in 2022. Overall salary increases in the US will be the most since 2007, a survey of 1.550 organizations from workplace consultant Willis Towers Watson (WTW) found, and above the 4.2% increase for this . The industries predicted to have the biggest salary increases in 2022 compared to what their increases were in 2021 are: Retail and wholesale trade: 2.8% to 3.6%. ARLINGTON, VA, July 20, 2021 Pay raises are making a comeback. 96% However, we have not seen a labor market like this one in quite some time if ever. Also, remember that every organization will have its own set of goals and priorities. (EDGAR Online via COMTEX) -- ITEM 7. End of main navigation menu. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. Supplemental tactics including sign-on bonuses, equity and cash retention, and recognition enhancements plus employee experience drivers such as enhanced career enablement, emphasis on mental wellbeing, focus on DEI [diversity, equity and inclusion], and learning and reskilling opportunities can combine to improve the effectiveness of a compensation program. However, in countries where inflation is particularly low, employees may see an increase in their real paythe UK is a good example. The report summarizes the findings of WTW's annual survey on salary movement and reviews practices as a means of helping companies with their compensation planning for 2022 and beyond. Yet, while uncertainty was the word of the year (thankfully nudging out 2020s unprecedented), one thing was clear: Labor market pressures stemming from the pandemic had a significant impact on how organizations finalized their 2022 pay budgets. It will be interesting to observe whether these nations are, in fact, able to maintain these levels. Even with ongoing pressures, organizations must stay levelheaded and take a conservative approach that aligns with market conditions and is directed by clear business priorities. Are salary increase budgets going to be higher or lower than the prior year? Share this article. WTWs December 2022 Salary Budget Planning (SBP) Report, Bombarded by questions about pay and inflation? Global pension assets record largest annual decline since the global financial crisis. And projections from the report show that compensation and HR professionals are expecting even higher increases in 2023. The survey was conducted from October 3 to November 4, 2022. With reliable market data that supports the critical and defensible decisions you must make. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance. In the end, these analyses would confirm salary growth that eclipses the 3% salary budget. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Cant keep them. It will be harder to predict what the future holds for the remaining 75% of organizations that will update salaries between January and April. End of main navigation menu. However, also consider that the rate was 3.5% in January and February 2020, and then went up slightly in March 2020 to 4.4%. Hatti Johansson Labor markets and inflation have made 2022 another year of unexpected changes. However, the duration and scale are unknown. Based on 31 salaries posted anonymously by Aon Senior Client Advisor employees in Redruth, England. More than two-fifths of organizations either have adjusted or are considering adjusting salaries more aggressively; 90% of organizations making or considering salary increase adjustments are doing two adjustments per year. Determine strategic goals that align with both your compensation philosophy and your organizations business strategy. Step 3: Confirm contact preferences*. 2022 will see salaries and other aspects of life return to some sense of normality and more companies implementing regular salary reviews and higher increases than in 2021. More than ever, making the most of your capital means solving a complex risk-and-return equation. We have answers. For instance, as a result of recognizing that labor shortages, and not inflation, are the primary driver of growing salary budgets, many employers are targeting certain segments such as hourly workers, digital talent and workers with in-demand skills to receive higher pay.". Long story short, prioritizing and segmenting rewards actions will be vital for an appropriate return on investment. With more money at play than has been the case in nearly 20 years, it is critical to align your priorities to the salary increase budget you establish (which, of course, should be based on sound market data). Among organizations that reported higher 2022 actual salary budgets compared to 2021, the most cited reasons for those increased budgets were: In October and November 2022, when the December SBP survey was fielded, 45% of respondents in the 15 largest economies said their salary budget increases were higher than projections just a few months earlier in July. January 28, 2022. The best way to understand how your organization may need to increase pay in the future is to analyze all changes to pay throughout a complete calendar year, not just the one-time event that represents the merit pay process. All rights reserved. Labor market and inflationary pressure fueling higher-than-projected increases. Clients depend on us for specialized industry expertise. The question boils down to, What am I trying to achieve with these salary increases? This sounds simple; however, a clear answer is not always easy. The latest unemployment rate, as measured by the U.S. Bureau of Labor Statistics and reported at the time this article was written, is 4.2%. It seems that once we hit a new floor on salary budgets, it tends to stick for a while and slowly inch its way back up, only to be slammed down again by the next economic downturn. The Great Resignation has forced employers to pay higher starting salaries for talent theyve lost, while also adjusting salaries to retain those they are trying to keep. According to the survey, nearly three in four respondents (74%) cited the tight labor market for increasing their budgets from prior . Thats almost a full percentage point higher. 2021. Your ability to manage risk is key to your thriving in an uncertain world. Editor's note: At the time of publication, WTW has reported that salary budgets in the U.S. are showing median salary budget 2021 actuals and 2022 projections of 3% (with more than 1,000 companies reporting). To address ongoing challenges, organizations are deciding how to focus their compensation spend for the greatest impact. Zhongzhi Enterprise Group Co., Ltd. Jan 2014 - Feb 20173 years 2 months. Limit the Use of My Sensitive Personal Information. But these actions dont happen simultaneously. Consider segmenting by employee level (e.g., hourly, professional, executive), performance level or even by areas in which youre having trouble attracting and retaining (e.g., digital talent). UK employers increased the amount of money they put aside for staff pay rises over the second half of last year, it has emerged. The average raise is expected to be 3% next year, up from 2.7% in 2021, according to a survey by Willis Towers Watson, a human resources consulting company. Most organizations globally are reporting an uptick in their median total salary increase budgets for 2022 vs what they had planned in 2021. 4.9% The 15 largest economies in the world are forecasting an average increase of 4.3%, which is 3 percentage points higher than the actual increase of 4.0% in 2021. Our salary surveys provide robust, detailed salary data for all industries and countries, covering executives and employees at all levels. "As with their responses to the pandemic, employers are looking to be resilient and adaptable in their approach. Willis Towers Watson employees with the job title Insurance Broker make the most with an average annual salary . Whether you can expect to receive a raise or not in 2022 depends on your location in the world, according to recent forecasts by Willis Towers Watson. Taking a holistic view will ensure your salary increase process is transparent and emphasizes the connection between salary increases and business performance. While 44% of organizations reported not changing their projections from earlier in the year, almost 1 out of 4 (23%) reported that their 2022 projections are higher now than anticipated earlier in 2021. Compensation Strategy & Design|Total Rewards, Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). All rights reserved. | Photo by Chris Welch / The Verge End of main navigation menu. Copyright 2023 WTW. Early Fall may signal the beginning of autumn colors, pumpkin spice everything, and sweater weather for some. Companies gave employees an average pay increase of 2.8% in 2021. Note: This data is from multinational organizations with operations in Russia; data from local Russian organizations was not collected for the July report. Companies are now budgeting an overall average increase of 3.4% in 2022, compared with the average 3.0% increase they had budgeted in June 2021. January 12, 2022. That's the finding from a new survey by . End of main navigation menu. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Results from WTWs July global salary budget survey, By The average salary for Actuarial Analyst at companies like WILLIS TOWERS WATSON in the United States is $78,127 as of October 27, 2022, but the range typically falls between $68,656 and $87,599. Based on 19 salaries posted anonymously by Aon Strategy Consultant employees in Redruth, England. The average job hopper receives a 10% - 20% increase in salary every time they move Then, start narrowing how to achieve those goals by setting priorities. This projection is followed by 2023 projections in the United Kingdom (4.0%), Germany (3.8%), and Spain (3.6%). Limit the Use of My Sensitive Personal Information. ARLINGTON, VA, January 13, 2022 Fueled by tight labor markets, U.S. employers are boosting their original salary increase projections for 2022 as the Great Resignation shows no signs of abating. Of these actions, 65% of companies say they are in place with no end date until 2023 or later, while 23% havent put any actions in place but are planning to do so. 2022 salary budgets: With worker shortages, why arent they higher? This includes both monetary and nonmonetary actions to attract and retain employees particularly for critical or high-performing talent. The larger raises coincide with a surge in demand for labor and a shortage of supply of hourly workers and specific professional roles with premium skills. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Dont underestimate the importance of this education and communication effort. The average actual salary increase hit 4.9% in 2022, as compared to a 4.0% actual increase amount in 2021, among those . . Dallas, Texas, United States . More than ever, making the most of your capital means solving a complex risk-and-return equation. . Copyright 2023 Surperformance. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success-and provide perspective that moves you. The most cited reasons for the higher projections were: Resilience tempered with cautious optimism will be the 2022 mantra for employers, with most looking to increase salaries and provide bonuses for employees particularly for critical or high-performing talent. In North America, 100% of countries are expected to see an overall increase in salaries in 2022, but in the Middle East & Africa, that isn't the case. Clients depend on us for specialized industry expertise. Avg Price Recovery. Organizations with operations in Russia are forecasting salary increase budgets of 7.3% in 2023, which is half a percentage point higher in 2023 compared to the 2022 average actual increase of 6.8%. But increased salary budgets only make it more critical for organizations to have a clear strategy for awarding pay increases as effectively as possible, prioritizing critical employees and hot jobs, and differentiating for performance. ARLINGTON, VA, November 17, 2022 Overall salary increases in the U.S. are forecast to rise to 4.6% in 2023, up from an actual spend of 4.2% this year, as the majority of companies react to inflationary pressures (77%) and concerns over the tighter labor market . At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. The jump in the Belgian salary increase is due to the automatic wage indexation tied to inflation, which is unique from the rest of the eurozone. 2000-2002, 2008 Data: Towers Watson Database on Merit Increase Budgets taking averages of WWDS, Mercer, and World at Work Surveys Beijing, China. End of main navigation menu. Yet, salary increases still will need to be allocated in line with market conditions and influenced by clear business priorities. For now, continued higher budgets are projected in most of the worlds largest economies. According to WTWs John Bremen, despite overall population growth (11.9%) and labor force growth (4.5%), the labor force shrank 3.4% from 2010 to 2020 among the historical entry-level talent pool (workers ages 16 to 24). Clients depend on us for specialized industry expertise. TORONTO, ON, September 28, 2021 Pay raises are making a comeback. Maintaining an on-going relationship with clients and gaining an understanding of the clients' business and industry. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable successand provide perspective that moves you. Facing ongoing change in 2021, organizations around the world were forced to continually adapt and be resilient. The 2021 General Industry Salary Budget Survey found only 3% of companies are not planning to boost salaries next year, a drop from 8% that didnt give raises this year. Nearly half of companies (46%) are planning or considering improving the employee experience to address inflationary pressures and drive retention. Willis Towers Watson. Executives, management and professional . Belgium), your salary increases will need to follow the guidelines. Increased budgets are evident across most of the worlds largest economies. However, roughly one-third of participants have revised their 2022 projections upward and the 2022 average projected increase (as opposed to median) is 3.4%. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Results from our salary budget planning survey, By December 13, 2022 As part of a specialist Defined Contribution (DC) team which advises . End of main navigation menu. Figure 1. Only 3% of employers freezing salaries. Copyright 2023 WTW. Given the crescendo of these questions, this article helps explain why projections are what they are, and serves as food for thought about how to think of salary budgets as a barometer of overall compensation spend in the future. But its important to remember that every organization will have its own set of goals and unique priorities. With a strong propensity to control fixed costs, its no wonder that executives and HR look to tightly manage salary budgets. Organizations should prioritize their actions based on the needs of both employers and employees and pay close attention to market data to inform any changes.. For more countries, budgets for the upcoming cycle have changed from increases projected earlier in 2020. While payroll increases are real, they are not reflected in salary budgets. On the one hand, employers need to continue effectively managing fixed costs as they rebound from the pandemic. Within some industries, base . Dont risk underinsurance protect yourself against inflation now, Global Semiconductor Industry Survey Report, Top 5 employee compensation trends for 2021, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX), Preparing for the EU Shareholders Rights Directive. Approximately 18,000 sets of responses were received from companies across 130 countries worldwide. U.S. companies plan to give employees larger raises next year as they recover from the economic fallout from the pandemic and face mounting challenges attracting and retaining employees, according to a new survey by Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company.