Expectations for Smaller Merit Raises in 2024
Companies are adjusting their budgets for merit raises in the upcoming year, signaling a shift from the consistent increases seen in the past two years. Surveys conducted by Aon Plc and Mercer indicate that employers in the United States are planning for smaller merit raises in 2024 compared to previous years. Aon Plc's survey of over 5,500 employers across industries reveals an average merit raise of around 3.7% for next year, down from 3.9% in the current year. Similarly, Mercer's survey projects a decrease in merit-based salary increases from 3.9% in 2023 to 3.5% in 2024.
Factors Influencing the Decrease
The decrease in merit raises can be attributed to companies tightening their labor budgets and the easing of inflation from the previous year. Tim Brown, a partner at Aon, explains that reduced spending and lower inflation rates are putting pressure on salaries. Workforce leaders, including Bob Toohey from Allstate Insurance Co., anticipate compensation budgets to be lower across companies compared to the previous year.
Resilient Labor Market and Changing Economic Landscape
Despite the decrease, the projected merit raises by Aon and Mercer still exceed pre-pandemic levels. The resilience of the labor market and historically low unemployment contribute to these higher increases. However, Lauren Mason, Senior Principal at Mercer, suggests that further reductions in compensation budgets may occur as companies adapt to the changing economic landscape.
The technology sector has been particularly affected, with a decline in aggressive hiring and projected merit raises of just 3.3% next year. Tech firms, which typically lead in salary increases, are now behind sectors like energy and consumer goods. Specialized roles such as machine learning engineers and data scientists remain in high demand despite the overall decrease in tech salaries.
In conclusion, employees should anticipate smaller merit raises in 2024 as companies adjust their budgets and respond to changing economic conditions. The labor market's resilience and low unemployment continue to influence compensation trends, but companies are adapting to the evolving landscape, which may result in further reductions in compensation budgets.
Hot Take: The Impact of Smaller Merit Raises on New Businesses in 2024
The projected decrease in merit raises for 2024, as indicated by surveys from Aon Plc and Mercer, could have significant implications for new businesses. This trend, driven by companies tightening their labor budgets and adapting to a changing economic landscape, suggests a more conservative approach to compensation in the coming year.
Challenges and Opportunities for New Businesses
For new businesses, this could present both challenges and opportunities. On one hand, the pressure to offer competitive salaries to attract and retain talent may intensify, particularly in sectors like technology where specialized roles remain in high demand despite overall salary decreases. On the other hand, the easing of inflation and the resilience of the labor market could provide some stability for new businesses navigating their initial stages of growth and development.
Adapting to the Changing Landscape
The key for new businesses will be adaptability. While smaller merit raises may be the general trend, individual business strategies may vary based on industry, market conditions, and the specific needs and goals of the business. New businesses that can effectively navigate these complexities will be better positioned to thrive in 2024's evolving economic landscape.
In conclusion, while the anticipation of smaller merit raises in 2024 presents certain challenges, it also opens up opportunities for new businesses to demonstrate resilience, adaptability, and strategic planning in their approach to compensation and growth.