Trends that will drive 2023 rewards decisions. 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. "2023 promises to be another banner year for employees seeking salary increases," says Chris Fusco, senior vice president of compensation at Salary.com. Clients depend on us for specialised industry expertise. managing director of work and rewards at consultancy Willis Towers Watson in Irvine, Calif. . 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. To address ongoing challenges, organizations are deciding how to focus their compensation spend for the greatest impact. This feels comparatively low especially if you look back at April 2020 when unemployment spiked at 14.8%. . Figure 1. Updated 12:01 PM EDT, Fri July 15, 2022 . Fieldset Label. Willis Towers Watson plc published this content on 13 January 2022 and is solely responsible for the information contained therein. This projection is followed by 2023 projections in the United Kingdom (4.0%), Germany (3.8%), and Spain (3.6%). Focused on tighter labor markets and the need to attract and retain talent, more than 80% of organizations globally held their regular salary review cycle in 2021 (compared to 63% in 2020), with budgets increased over prior years. |
From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Editors 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). But, for now, it appears that the same Lets not be the first to significantly raise salary budgets mentality is at play for 2022 projections. 2021 salary increases were notably softer than initially expected, with most markets dialing down their original forecasts to be more in line or slightly below 2020 salary budgets. Last year, like many things unique to 2021, this meant trying to understand why U.S. salary budgets looked like they werent moving much higher than the 3% theyd been for the past decade. With attraction and retention issues persisting, employers should consider the overall employee experience and not just salary increases, said Lesli Jennings, North America leader, Work Rewards and Careers, WTW. Companies gave employees an average pay increase of 2.8% in 2021. Together, we unlock potential. That's a far cry from just a couple of years ago. Salary.com, Inc. Sep 01, 2021, 08:30 ET. Labor markets and inflation have made 2022 another year of unexpected changes. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable successand provide perspective that moves you. The highest increases forecasted are in India (10.0%), Russia (8.6%), Brazil (7.5%), Mexico (6.4%) and China (6.0%). Form 10-K (annual report [section 13 and 15(d), not s-k item 405]) filed with the SEC Global pension assets record largest annual decline since the global financial crisis. While it is common for the final increases for the year and projections for the following year to change over time as organizations learn more about the factors affecting increases (e.g., unemployment, supply and demand of labor), the change typically is not this dramatic. When asked why, responses spoke to the likelihood of sustaining the gains earned in 2020 and that conservatively managing fixed costs protects companies from having to take more drastic measures if high financial gains reversed in 2021 or beyond. For example, instead of trying to apply a single global plan, group countries based on their economic, labor market conditions, or statutory requirements (e.g., mandatory indexation, collective bargaining). Labor market and inflationary pressure fueling higher-than-projected increases. Click to return to the beginning of the menu or press escape to close. We have answers. Prioritizing and segmenting increases is vital for an appropriate return on investment. Best dividend capture stocks in Jan. Payout Ratio (FWD) 0.00%. Thats according to a new survey by WTW (Willis Towers Watson, NASDAQ: WTW), a leading global advisory, broking and solutions company. Then it completely skyrocketed when COVID-19 hit. This translates to an average salary increase of 9.8% in 2023, compared to the actual 9.5% increase paid out in 2022. At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. For more countries, budgets for the upcoming cycle have changed from increases projected earlier in 2020. With workers shortages and low unemployment, why arent we seeing higher merit budgets for the coming year? could easily be heard in the virtual hallways across corporate America second only to the question, With inflation on the rise, shouldnt we be thinking about raising salary budgets?". While the optimism shown by different countries comes with hints of caution, 2022 will likely be a better year for salary increases. The U.S. Department of Labors Employment Cost Index showed that pay rose 1.5% in the third quarter of 2021 (the latest data), up from 0.9% from the prior quarter a significant increase. Your ability to manage risk is key to your thriving in an uncertain world. However, rising inflation in Argentina and Venezuela made these countries the exceptions to the rule, with increases of 7.3 and 279.9 percentage points higher in 2021 vs. 2020. January 12, 2022. 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. 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. And projections from the report show that compensation and HR professionals are expecting even higher increases in 2023. 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. Compensation Strategy & Design|Total Rewards, Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). End of main navigation menu. 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. Facing ongoing change in 2021, organizations around the world were forced to continually adapt and be resilient. Finally, there is a certain psychology that says those in leadership that managed through the Great Recession of 2008 to 2010 still have a hangover mindset driving their conservative approach to increasing fixed costs. 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. Read more at The Business Times. 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. HR pros plan for the highest pay increases in nearly 20 years, By
Companies gave employees an average pay increase of 2.8% in 2021. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. 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.That's according to a new survey by WTW (Willis Towers Watson, NASDAQ: WTW), a leading global advisory, broking and solutions company. Had the pandemic never happened, we likely would still be facing labor shortages. Going into 2022, workers' pay is all about supply and demandand inflation. While current pay budgets have risen to 4.2%, in 2022 more than two-thirds of companies (70%) spent more than they originally planned on pay adjustments for the past 12 months. 2022 salary budgets: With worker shortages, why arent they higher? By Kathryn Mayer. All rights reserved. The report summarizes the findings of WTWs annual survey on salary movement and reviews practices as a means of helping companies with their compensation planning for 2022 and beyond. 0 yrs. In response to a tight labor market, employers are planning to up employee salaries in the biggest projected hike in 15 years, new data from Willis Towers Watson finds. 2021), President, Chief Executive Officer & Director. Unlike the financial crisis of 2008 to 2010, when virtually every industry was impacted the same way, the economic fallout of 2020 was a health crisis certainly, but financial systems remained sound and strong. Share this article. Employers need to deliver a sound employee value proposition supported by comprehensive Total Rewards programs. All rights reserved. They also would provide compensation professionals and organization leadership a greater understanding of whats needed for the coming year (which includes those one-time merit increases) as well as a real picture for overall salary movement. At an average of 5.3% increase for PMETs and support staff, the Asia Pacific region, especially the emerging markets, is looking at noticeably higher pay in 2022. Although it's a new recent high, it's not by much: Companies, on average, are budgeting a 4.1% salary increase for 2023, just above this . However, roughly one-third of participants have revised their 2022 projections upward and the 2022 average projected increase (as . We would have faced a steady decline in available workers rather than the drastic layoffs and unemployment increases that we experienced in spring 2020. In April and May 2022, when the July Salary Budget Planning Survey was fielded, 34% of respondents across the largest economies said that their salary budget increases were higher than they had projected just a few months prior. Most organizations in the 15 largest economies experienced a dip in 2021 compared to their 2020 actual budgets, increasing their salary budgets by an average of 4.0% among those granting increases. Address your talent issues with a disciplined salary review process. The 25% of organizations that update their salaries between June and December will be able to leverage the markets to determine their actions. "While companies are boosting salary budgets, bigger pay raises alone won't be enough to help address their attraction and retention challenges. Beijing, China. Energy: 2.65% to 3.4%. This translates to . 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. Nearly three in four respondents (74%) cited the tight labor market for increasing their budgets from prior projections, while only one-third cited anticipated stronger financial results (34%) and inflation or the rising cost of supplies (31%). 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. Distributed by Public, unedited and unaltered, on 13 January 2022 14:20:02 UTC. However, in countries where inflation is particularly low, employees may see an increase in their real paythe UK is a good example. Share this article. ARLINGTON, VA, July 20, 2021 Pay raises are making a comeback. In fact, the current environment makes these challenges even more difficult. In the Hospitality, Travel and Oil and Gas industries, companies likely lowered their salary budgets in 2020, with many going well below 3%. Belgium), your salary increases will need to follow the guidelines. Specifically, Willis Towers Watson found in July that companies project executives, managers and other professional employees will receive average salary increases of 3% in 2022, compared to the . Your ability to manage risk is key to your thriving in an uncertain world. Also Read 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. In 2023, compensation and HR professionals will need to continually monitor labor markets and economic conditions and be flexible enough to act quickly when needed. Willis Towers Watson employees with the job title Insurance Broker make the most with an average annual salary . 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. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). Management and professional employees receiving the highest possible performance rating were granted an average increase of 4.5% this year, 73% higher than the 2.6% increases granted to those receiving average ratings. 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. In the end, if employees raise real-time data they find online to show they are getting a pay cut because your salary increases dont match inflation, you have some work to do to educate them about basic economics and labor markets. Its easy to forget that several factors drive salary increase budgets and, as such, those factors should be viewed as one piece of a much larger pie. There are growing concerns that a recession is unavoidable. How inflation influences pay practices, Limit the Use of My Sensitive Personal Information. COVID-19 also affected the financial health of different industries to the extremes. 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. Or perhaps you need a more targeted approach to retain specific employee groups by offering retention bonuses or spot award or adjusting salary ranges more aggressively. The extreme differences experienced by industries drove a true mashup of salary budget results. |
Dont just focus on base salary adjustments. Organizations in smaller economies shared a similar fate, mostly averaging similar salary budgets in 2021 when compared to 2020. While payroll increases are real, they are not reflected in salary budgets. It will be interesting to observe whether these nations are, in fact, able to maintain these levels. It will be harder to predict what the future holds for the remaining 75% of organizations that will update salaries between January and April. Thats almost a full percentage point higher. Salaries in the Asia Pacific are likely to rise next year, according to the latest figures from Willis Towers Watson, and the increase will be the highest among regions globally. 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.". Your ability to manage risk is key to your thriving in an uncertain world. Research by global advisory, broking, and solutions company Willis Towers Watson (WTW) found that average 2022 pay hike budgets grew from 2.9% in July 2021 to 3.2% in December. For example, Indias salary budgets continued climbing from 8.2% in 2020 to 8.7% in 2021 and finally 9.9% in 2022. One in three employers bumped up original salary increase projections. 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. Hatti Johansson
Among the major industry groups, high-tech and pharmaceutical companies project the largest increases (3.1%) followed by health care, media and financial services companies (3.0%). 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. Cant keep them. Salary budgets are not quite as responsive to changes in the labor market as we might think. Average salary increases across regions (excluding zeros), Global Innovation and Product Development Leader, Rewards Data Intelligence. It also is smart to review pay changes for the overall population (not just the same population) because that shows the true growth in compensation spend as increases in starting salaries for new hires also are factored into that analysis. Thats because employees get promoted, they get counteroffers and retention monies, and equity increases. Remember to segment your workforce, for example by employee level (e.g., hourly, professional, executive), performance level or jobs in which youre having trouble attracting and retaining talent. Consider other important components of your employer-employee deal, including bonuses, long-term incentives, health and wellness benefits, career progression, and learning and development opportunities. Then, start narrowing how to achieve those goals by setting priorities. However, considering that changes in salary budgets often lag economic trends by 6 to 12 months, it appears that we are now seeing salary budgets catch up with labor market dynamics. With a strong propensity to control fixed costs, its no wonder that executives and HR look to tightly manage salary budgets. Unparalleled salary benchmarking database Each year, we collect salary data on over 35 million employees in more than 11,000 organizations, across more than 130 countries. 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). More than ever, making the most of your capital means solving a complex risk-and-return equation. 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. Retail industry companies are projecting average raises of 2.9% next year. It will be interesting to observe whether these nations are, in fact, able to maintain these levels. Oil and gas industry companies, as well as leisure and hospitality industry companies, are budgeting significantly lower salary increases for employees (2.4%). see the December . High unemployment started to ease in the summer of 2020 and was back below 7% by the end of the year. Also, the United Kingdom, Spain and Mexico saw increase budgets of 1.0 to 1.2 percentage points higher in 2022 compared to 2021. That may mean changes to how salary budgets have historically responded to economic pressures. By focusing on health and wellness benefits, workplace flexibility, careers and DEI, organizations can position themselves as the employer of choice for their current and prospective employees.. 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. Market data provides a good start for navigating the year ahead. 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%. 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.. 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. UK employers increased the amount of money they put aside for staff pay rises over the second half of last year, it has emerged. While there typically is some discussion on what drives annual salary budget projections (AKA merit budgets) every year, 2021 felt different. More than ever, making the most of your capital means solving a complex risk-and-return equation. Case in point: WTW's 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. Each of these are in line or higher for 2023 as compared to 2022 actual increases.