Mercer: 2025 Salary Projections Consistent with 2024

Employers may be cautious about pay due to economic concerns, but they are planning to stay consistent with salaries next year—at least for now.

On average, U.S. employers are budgeting for 3.3% merit increases and 3.6% increases for their total salary budgets for nonunionized employees, according to new data from consulting firm Mercer, which surveyed more than 1,100 employers to gauge what pay will look like in 2025. These numbers are the same as the actual pay increases that employers delivered in 2024.

Mercer’s analysis also found that, in addition to remaining consistent with salary increases, employers are planning to promote just under 10% of their employees in 2025. For companies with a separate promotion budget, the average promotion increase budget for 2025 is 1%, down slightly from 1.1% in 2024.

There are variations in compensation projections across industries, Mercer found. For example, technology and life sciences reported above-average compensation budgets, with merit and total increase budgets at 3.5% and 3.9%, respectively. On the other end of the spectrum, retail and wholesale reported merit and total increase budgets of 3.1% and 3.3%, respectively.

Although labor reports indicate the job market is still competitive, employers are cautious over a recession and other economic concerns that have caused them to pump the brakes on the aggressive pay bumps many employees have experienced over the past several years.

“Historical trends suggest a decline is likely in the months ahead, signaling a potential end of the elevated budgets we’ve seen over the past three years,” said Lauren Mason, Mercer’s U.S. workforce solutions leader.

Mercer’s data comes on the heels of other reports predicting employer compensation strategies for 2025.

Total rewards association WorldatWork found that U.S. employers are budgeting an average overall salary increase of 3.8%, down from the 3.9% average salary increase employers doled out this year.

A July survey of some 31,000 employers by WTW found that organizations predict a 3.9% jump in 2025, while also finding that roughly half (47%) reported that their salary budgets for the 2024 cycle are lower than the previous year.

And Payscale’s Salary Budget Survey, released in August, found that U.S. employers are planning for 3.5% pay raises on average next year—a dip from the past couple of years—due to a cooling labor market. Actual salary increase rates for U.S. employers were 4% in 2023 and 3.6% in 2024, according to Payscale, a U.S. compensation software and data company.

Together, the surveys suggest that although employers seem to be slowing pay increases from pandemic-era highs, salary hikes still remain fairly high when compared to pre-pandemic levels. The average salary increase in 2018, for instance, was 3%, according to WTW.

The deceleration in salary hikes isn’t expected to significantly hurt talent, Jeremy Feinstein, managing director at Empsight, a New York City-based human resource consulting firm specializing in compensation, told SHRM recently.

“Although salary budgets are expected to normalize back to pre-pandemic levels, companies aren’t projecting high employee discontent and turnover,” he said.

In light of these lower salary hikes, many organizations are looking at nonmonetary rewards to attract and retain employees.

“Many companies have permanently adopted hybrid and more flexible remote work policies and motivational engagement programs, where greater flexibility and worker satisfaction is projected,” Feinstein said.