Tight Labor Market Drives Employers to Boost 2023 Pay Raises

WTW News Release (07/14/22)

U.S. companies are budgeting an overall average increase of 4.1% in salary for employees in 2023, compared with the average actual 4.0% increase in 2022, according to a survey of 1,430 U.S. organizations by global advisory, broking, and solutions company WTW. These are the largest increases since 2008. Nearly two in three (64%) U.S. employers have budgeted for higher employee pay raises than last year, while two-fifths (41%) have increased their budgets since original projections were made earlier this year. Less than half of companies (45%) are sticking with the pay budgets they set at the start of the year.

Some companies are also making more frequent salary increase adjustments. More than one-third (36%) have already increased or plan to increase how often they raise salaries. Among those respondents, the vast majority (92%) have or will adjust salaries twice per year. Concerns about a tighter labor market seem to be the main driver for the higher budgets, with 73% of organizations citing this as their top factor. Forty-six percent of respondents cited employee expectations for higher increases that are driven by inflation, and 28% adjusted their budgets in anticipation of stronger financial results.