Pay hikes in 2024: What do employers have on the horizon?

After years of employers hiking salaries to keep talent in a tough labour market, a new study suggests across-the-board pay raises may not be in the cards at many organisations in 2024.

A report out this week from ResumeBuilder.com found that 18% of companies surveyed had not yet decided if they were going to give raises next year, and 8% will not. While three-quarters plan to raise some salaries, at half of those companies, the raises will go to 50% or less of employees, according to a survey of 600 business leaders.

Stacie Haller, Chief Career Advisor at ResumeBuilder.com, told HRE that leadership universally understands that today’s employees expect yearly raises—and without them, productivity and retention will both take a hit. She suggests that companies considering restricting raises in 2024 may strategically be giving turnover a nudge—to avoid layoffs but still reduce headcount and costs in the ongoing uncertain economy.

“Companies are trying to look at next year and anticipate how they can weather any anticipated changing economic conditions in their industry and plan ahead,” says Haller, who cautions that the research was geared toward business leaders’ expectations for next year. And given the quickly changing world of work and external factors influencing it, those predictions could shift, she notes.

However, the research comes on the heels of another study by WorldatWork that found a slowing in salary increase budgets: from 4.4% in 2023 to 4.1% next year.

Focusing on senior staff? Expect frustration

While WorldatWork found that raises may not be as large next year, ResumeBuilder.com’s research suggests a number of other potential pain points that HR may need to contend with.

For instance, only 14% of those anticipating raises will give them to everyone in the organisation. More than one-third of respondents said executive or senior-level employees will get preference for raises.

That could stoke resentment among non-senior staff, Haller says.

“We have seen an increase of union strikes, and they have all noted that the C-level executives’ earnings are several hundred times more than their average employee, and this is not justifiable to any employee in an organisation,” she says, adding that restricting raises by job levels will only fuel that frustration and could lead to more strike activity.

Even in environments without unions, organisations looking to keep turnover at bay must be focused on providing a “supportive culture,” Haller says, which includes paying all employees “appropriately, with yearly meaningful raises.”

Right-sizing pay raises

Performance-based raises are the most common type of salary hike (82%) leaders are planning for 2024, although more than two-thirds of respondents say their organisations will offer cost-of-living adjustments. However, how employers assess that rate varies.

For instance, the most common (32%) cost-of-living raise will be 3%, although 28% will set it at 4% and 27% at 5% or more. Twelve percent will give adjustments of 2% or less.

READ: Purpose versus pay: What factors more when choosing a job?

Given that inflation remains high and employees are contending with everything from record-high mortgage rates to the resumption of student loan payments, HR should help guide executives toward a higher-range cost-of-living adjustment, Haller says.

“Unless the increase is over 4%, employees are not being right-sized to today’s economy and how they live their daily lives,” she says. “Employees know this—and this type of raise will only cause resentment among staff and as we have seen, reduce retention, productivity and morale.”

About the author: Jen Colletta is Managing Editor at HRE, where this article was first published.