US salary budgets expected to remain the same in 2025

Core Insights - Despite a tight labor market, U.S. companies are maintaining salary increase budgets at similar levels to the previous year, with a projected average increase of 3.7% for 2025 compared to 3.8% in 2024, both above the pre-pandemic norm of 3% [1][2] Salary Increase Trends - The average payroll increase for companies surveyed was 5.5% in 2024, indicating a healthy rate of salary increases by historical standards [2] - Companies planning to reduce salary budgets cite weaker financial results (36%) and cost management concerns (34%) as primary reasons, while those increasing budgets point to inflationary pressures (39%) and tight labor market concerns (31%) [3] Employee Retention and Attraction - A decrease in reported difficulties in attracting and retaining employees is noted, with only 36% of organizations facing challenges, down from 45% last year [4] - Organizations are focusing on improving workplace culture, with 54% emphasizing diversity, equity, and inclusion, and 53% enhancing the employee experience [6] Comprehensive Benefits Approach - Companies are encouraged to evaluate their benefits offerings beyond salary, including healthcare, retirement benefits, work flexibility, and meaningful contributions to workplace culture [5] Labor Market Dynamics - The U.S. labor market has stabilized, with a significant drop in demand for talent over the past three years, while supply remains unchanged, leading to vulnerabilities [7] - Employers considering lowering salary increases should be cautious, as competition for talent remains strong in certain industries, emphasizing the importance of retention strategies [7] Survey Methodology - The Salary Budget Planning Report was compiled from over 37,000 responses from companies in over 150 countries, with 2,002 organizations responding from the U.S. [8]