Current Conditions: Employment Holds Steady
In Q1 2025, 44% of HR executives rated current employment conditions as good or excellent (42% good; 3% excellent). Meanwhile, nearly half of HR executives (48%) rated employment conditions as fair, with only 7% perceiving conditions as poor or very poor (<1% very poor; 7% poor).
Following a slight increase in Q4 2024, HR executives’ evaluations of employment conditions remained steady, with the same percentage reporting good or excellent ratings. Correspondingly, the same percentage of HR executives rated conditions as fair (no change from Q4) while those who rated conditions as poor/very poor decreased marginally (a 1-percentage-point decrease). This reflects more stability in assessments of employment conditions than economic conditions.
Employment Forecast: Expectations for the Next 6 Months
The U.S. labor market ended 2024 on a high note, with total nonfarm employment gains in November and December 2024 that beat analysts’ expectations.1 Entering 2025, a dominant theme was that — although the labor market remained strong and competitive by historical standards — it had cooled significantly from the overheated conditions that prevailed during much of 2021-2023 and entered a new era characterized by comparatively stable, predictable conditions.
This broader stability is reflected in HR leaders’ outlook for the months ahead. According to SHRM’s Q1 2025 data — collected prior to the change in the U.S. presidential administration — 42% of HR executives expect good or excellent employment conditions over the next six months, consistent with sentiment in Q4 2024. The share expecting fair conditions rose modestly to 48% (up from 45%), while those anticipating poor or very poor conditions declined to 10%, down from 13% the previous quarter.
Together, these findings point to a cautious yet steady optimism among HR leaders, even amid political transitions and evolving workforce dynamics.
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HR Execs Anticipate Total Rewards and Recruiting Budgets to Level Off
Although the overall labor market remained competitive by historical standards entering 2025, it is important to note that conditions have been steadily softening since the Great Resignation era. Furthermore, by the end of 2024, overall inflation had also cooled significantly. For both reasons, we would expect growth in employment compensation costs to moderate, and this expectation is borne out in the data.
In Q1 2025, less than half (48%) of HR executives anticipate an increase in their total rewards budget, marking an 8-percentage-point decrease compared to Q4 2024. Additionally, 44% expect their total rewards budget to remain unchanged, representing a 9-percentage-point increase from the last quarter. This shift toward steady budgets may reflect the timing of annual raises and the rollout of new benefits plans typically set earlier in the year.
Just over 1 in 4 HR executives (27%) expect their recruiting budget to grow, reflecting a 3-percentage-point decrease from the previous quarter. Interestingly, 64% of HR executives foresee no changes to their recruiting budget, a 4-point increase from Q4. This could suggest a focus on internal talent development and retention as the new year progresses.
| Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% | |
|---|---|---|---|---|---|---|---|
| Total rewards budget | 1% | 9% | 38% | 44% | 6% | 1% | 1% |
| Recruiting budget | 1% | 6% | 20% | 66% | 6% | 3% | <1% |
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Compensation Trends: Most Project Salary and Wage Increases in Early 2025
Compensation growth rates are expected to remain relatively stable. While many still anticipate increases, projections have dipped slightly from Q4 2024. In Q1 2025, 76% of HR executives anticipate a rise in annual salaries over the next six months — marking a 4-percentage-point decrease from Q4 2024. Similarly, 7 in 10 (70%) expect hourly wages to increase during the same period, reflecting a notable 6-percentage-point decrease from Q4. The majority are predicting increases of less than 10%. Few HR executives foresee no changes in annual salaries (22%) or hourly wages (29%). This slight downward trend may reflect new year adjustments, as many organizations review and adjust compensation at this time.
When it comes to hiring costs, less than half (45%) of HR executives expect an uptick in cost per hire, a 4-percentage-point decline from Q4 2024. Meanwhile, over half (51%) predict no change in hiring costs, up by 4 percentage points from Q4 2024.
| Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% | |
|---|---|---|---|---|---|---|---|
| Annual salaries* | 1% | 5% | 71% | 22% | 2% | 0% | 0% |
| Hourly wages* | 1% | 3% | 66% | 29% | 1% | <1% | 0% |
| Cost per hire* | 2% | 8% | 36% | 51% | 43% | 01% | 0% |
* = New in Q2 2024
Takeaways/Implications
76%
of HR executives anticipate a rise in annual salaries over the next six months.
70%
expect hourly wages to increase during the same period.
51%
predict no change in hiring costs.
Slightly More HR Executives Expect Modest Growth in eNPS
Over one-third (35%) of HR executives anticipate an increase in their eNPS/employee engagement, marking a 5-percentage-point jump compared to Q4 2024. Meanwhile, nearly half (48%) predict no change, a 4-percentage-point decrease from Q4 figures.
| Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% | |
|---|---|---|---|---|---|---|---|
| eNPS/Employee Engagement | <1% | 5% | 29% | 48% | 14% | 3% | 1% |
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Small Uptick in Employee Productivity and Revenue Projections
In Q1 2025, 4 in 10 (40%) HR executives anticipate a rise in overall productivity — a 4-percentage-point increase from Q4 2024 — while under half (46%) foresee no change, compared with 51% who said the same the previous quarter. Similarly, 43% of HR executives expect revenue per employee to grow in the next six months, reflecting a 5-percentage-point increase from Q4, whereas 48% predict no change, a 3-percentage-point decrease from Q4.
| Increase of over 20% | Increase of 10%-20% | Increase of less than 10% | No change | Decrease of less than 10% | Decrease of 10%-20% | Decrease of over 20% | |
|---|---|---|---|---|---|---|---|
| Overall productivity | 0% | 9% | 32% | 46% | 11% | 2% | <1% |
| Revenue per employee** | <1% | 6% | 37% | 48% | 8% | 2% | <1% |
** = New in Q3 2024
Methodology
The CHRO Outlook survey is a research study conducted quarterly. The survey was fielded electronically using the SHRM Voice of Work Research Panel to U.S.-based HR executives and senior HR executives (VP+). Respondents represented organizations of all sizes and across industries.
| Quarter, Year | Sample Size (n) | Fielding Dates |
|---|---|---|
| Q4 2022 | n = 241 | 12/01/22 - 12/22/22 |
| Q1 2023 | n = 249 | 03/06/23 - 03/21/23 |
| Q2 2023 | n = 199 | 06/08/23 - 06/16/23 |
| Q3 2023 | n = 536 | 08/30/23 - 09/11/23 |
| Q4 2023 | n = 376 | 11/17/23 - 11/22/23 |
| Q1 2024 | n = 391 | 01/03/24 - 01/10/24 |
| Q2 2024 | n = 352 | 04/15/24 - 04/24/24 |
| Q3 2024 | n = 339 | 07/17/24 - 07/25/24 |
| Q4 2024 | n = 320 | 10/16/24 - 10/25/24 |
| Q1 2025 | n = 323 | 01/13/25 – 01/21/25 |
1. According to the BLS jobs report for November 2024 (published on Dec. 6, 2024), total nonfarm employment increased by 227,000 in November, slightly higher than what analysts were expecting. The jobs report for December 2024 was even stronger, with total nonfarm payrolls gains initially estimated to be 256,000 (well above analysts’ expectations). Since they were initially published, both numbers have been revised upward to 261,000 (November) and 323,000 (December).
Read the Q1 2025 series:
CHRO Employment Outlook | CHRO Economic Outlook | SHRM Hiring & Retention Difficulty Indexes