More data is pointing to slowing pay increases in 2025.
In 2023, 86% of chief financial officers (CFOs) said they planned to increase employee pay, according to data from Gartner. That figure was 71% in 2024.
Now, that number is down by 10 percentage points, with just 61% of CFOs planning to increase average employee compensation in 2025. It’s the third consecutive year that pay intentions are lower among CFOs, according to Gartner.
Gartner’s poll of 300 CFOs and other finance leaders in October 2024, released this week, found that 50% are planning average pay increases of 4%-9% this year, and 11% are planning an increase of 10% or more. Another 37% said they anticipated a “nominal” change.
“The slowdown in pay increases reflects falling rates of inflation and lower levels of voluntary employee attrition,” said Randeep Rathindran, distinguished vice president of research in the Gartner finance practice. “However, even though the labor market is cooling, CFOs must balance the potential risks of attrition and low engagement as employees still face stubbornly high costs for household necessities.”
In a SHRM pulse survey of 1,071 U.S.-based workers who were polled from Dec. 16-19, 43% of U.S. workers reported that inflation had an extreme or significant impact on their personal financial situation. Meanwhile, roughly half of U.S. workers (46%) expressed at least moderate concern about the impact of inflation on the value of their compensation.
We’ve rounded up additional articles from SHRM about 2025 compensation trends.
Employers Plan to Stay Consistent with Compensation Budgets in 2025
Previous research found that while employers predict pay increases to slow, salary-increase budgets at U.S. companies in 2025 are projected to remain fairly consistent with 2024. Mercer found that employers expect to increase total salary budgets for nonunionized employees by 3.7% on average, compared with the 3.8% average budget increase awarded in 2024. Meanwhile, merit increases are expected to rise by 3.3% in 2025, the same as in 2024.
Compensation budgets vary by industry. The technology sector expects above-average compensation budgets, with increases of 3.5% for merit and 3.8% for total compensation, Mercer reported. Meanwhile, the health care services industry reported below-average increases for merit (3%) and total compensation (3.5%).
Estimates will likely continue to shift, as many employers haven’t yet finalized their budgets. Mercer found that about 20% of the more than 850 organizations surveyed in November had confirmed their compensation budgets.
The Larger 2025 Pay Picture
Although pay increases will continue to be an important arrow in employers’ quivers for retaining and attracting talent, the red-hot pace of raises that has occurred over the past few years is subsiding.
“The labor market has cooled relative to the extraordinary conditions of 2021-2023 but remains tight by historical standards,” explained Justin Ladner, senior labor economist at SHRM. “In other words, even though compensation growth rates appear to be stabilizing, competition for labor remains strong overall.”
Ladner said that “barring an unforeseen shock that disrupts the labor market, it seems reasonable to assume that the conditions of 2024 will largely persist in 2025, with compensation growth remaining stable or slightly declining.”
Aside from slightly cooling pay increases, other compensation trends to watch this year include increased pay transparency and pay fairness.
Employee Satisfaction with Pay Is Dropping
As pay increases fall, so does employee satisfaction. One-third of employees (33%) feel negatively about their current financial remuneration—a significant jump from 23% in 2023—and 50% struggle to make ends meet due to rising costs, according to December 2024 data from BambooHR, an HR platform company based in Draper, Utah. The data also found that just over half of workers (56%) feel senior employees lack an understanding of living on a typical wage.
While it’s not particularly shocking that compensation satisfaction is falling as pay raises flatten, it is a trend that “should concern every HR leader,” Anita Grantham, former head of HR at BambooHR, told SHRM in December.
“Companies need to find ways to prioritize competitive pay for their people who are driving the business forward,” she said.
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