Companies gave employees an average pay increase of 2.8% in 2021. For instance, as a result of recognizing that labor shortages, and not inflation, are the primary driver of growing salary budgets, many employers are targeting certain segments such as hourly workers, digital talent and workers with in-demand skills to receive higher pay.. The jump in the Belgian salary increase is due to the automatic wage indexation tied to inflation, which is unique from the rest of the eurozone. Clients depend on us for specialised industry expertise. Companies are between a rock and a hard place when it comes to compensation planning, said Catherine Hartmann, North America Rewards practice leader at Willis Towers Watson. While payroll increases are real, they are not reflected in salary budgets. In 2023, compensation and HR professionals will need to continually monitor labor markets and economic conditions and be flexible enough to act quickly when needed. For compensation professionals, however, it means gathering salary budget projection data to report to senior leadership and solidifying how to apply salary increases for the coming year. 2021), President, Chief Executive Officer & Director. Results from WTWs July global salary budget survey, By Employees in the following five industries are expected to see the largest salary increases in 2022 compared with their actual increases in 2021: "There's a great reprioritization of work, rewards and careers under way, and it's putting significant pressure on compensation programs for many employers," said Catherine Hartmann, North America Rewards practice leader, WTW. That is, as the unemployment rate drops, logic would suggest that pay (and salary budgets) should go up. The 25% of organizations that update their salaries between June and December will be able to leverage the markets to determine their actions. Yet, while uncertainty was the word of the year (thankfully nudging out 2020s unprecedented), one thing was clear: Labor market pressures stemming from the pandemic had a significant impact on how organizations finalized their 2022 pay budgets. Lead Associate. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Share. Mar 2015 - Present8 years 1 month. The 15 largest economies are forecasting an average increase of 4.9% in 2023, which is 0.9 percentage points higher than the 4% actual increase in 2021 and aligned with the 4.9% average increase granted in 2022. Had the pandemic never happened, we likely would still be facing labor shortages. Early Fall may signal the beginning of autumn colors, pumpkin spice everything, and sweater weather for some. However, considering that changes in salary budgets often lag economic trends by 6 to 12 months, it appears that we are now seeing salary budgets catch up with labor market dynamics. Among the major industry groups, high-tech and pharmaceutical companies project the largest increases (3.1%) followed by health care, media and financial services companies (3.0%). These are followed by Germany, Spain, United Kingdom, China, Canada and Mexico, which have a projection of 4 percentage points higher in 2022 compared to 2021. With reliable market data that supports the critical and defensible decisions you must make. Average salary for Aon Strategy Consultant in Redruth, England: [salary]. Copyright 2023 WTW. Lori Wisper 57% of organizations reported that their budget for the 2022 cycle is higher than their 2021 compensation planning cycle. That may mean changes to how salary budgets have historically responded to economic pressures. This makes it important for employers to highlight and communicate the full arsenal of rewards. -, UBS Adjusts Willis Towers Watson's Price Target to $248 From $235, Maintains Neutral Rating, Willis Towers Watson Public : WTW Appoints Leigh Ann Rodgers Western Region Client Strategy Leader for North America. Companies are now budgeting an overall average increase of 3.4% in 2022, compared with the average 3.0% increase they had budgeted in June 2021. That projected wage growth is faster than actual raises paid in the prior . On the one hand, employers need to continue effectively managing fixed costs as they rebound from the pandemic. Taking a holistic view will ensure your salary increase process is transparent and emphasizes the connection between salary increases and business performance. For example, in regions where inflation remains relatively low (e.g., Middle East, Asia), salary increases may remain above inflation. At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. We would have faced a steady decline in available workers rather than the drastic layoffs and unemployment increases that we experienced in spring 2020. Companies gave employees an average pay increase of 2.8% in 2021. However, also consider that the rate was 3.5% in January and February 2020, and then went up slightly in March 2020 to 4.4%. In the end, these analyses would confirm salary growth that eclipses the 3% salary budget. EMPLOYERS in the Asia-Pacific plan to give the highest 2022 salary increases compared with North America and Western Europe, which are expected to stay flat, according to findings from a Willis Towers Watson survey. of respondents in the Willis . End of main navigation menu. Given the reality of worker shortages, without the pandemic we may have seen a greater impact on salary budget planning. Case in point: WTW's July 2022 Salary Budget Planning Survey results show that 96% of companies globally increased salaries (compared to 63% in 2020), and overall budgets have increased significantly over prior years. While it is true that salary budgets reflect the supply and demand of labor, which also is measured by the unemployment rate, there is a lag in the timing of that reflection. To address ongoing challenges, organizations are deciding how to focus their compensation spend for the greatest impact. Hatti Johansson All rights reserved. Case in point: WTWs July 2022 Salary Budget Planning Survey results show that 96% of companies globally increased salaries (compared to 63% in 2020), and overall budgets have increased significantly over prior years. The UK has . Copyright 2023 WTW. The 2021 General Industry Salary Budget Survey was conducted by Willis Towers Watson Data Services between April and June 2021. Among those organizations that reported higher 2022 actual salary budgets vs. 2022 projections, the most cited reasons were: Ongoing and diligent monitoring of labor markets and economics combined with continual adaptation is the modus operandi for employers in 2022. More than ever, making the most of your capital means solving a complex risk-and-return equation. Jan 2022 - Present 1 year 3 months. Approximately 18,000 sets of responses were received from companies across 130 countries worldwide. As inflation continues to rise and the threat of an economic downturn looms, companies are using a range of measures to support their staff during this time, said Hatti Johansson, research director, Reward Data Intelligence, WTW. Access the 2023 Salary Budget Trends Report, Benefits Administration and Outsourcing Solutions, Executive Compensation and Board Advisory, Financial, Executive and Professional Risks (FINEX). It dropped significantly throughout the rest of 2020. Results from our salary budget planning survey, By Within some industries, base . In the Hospitality, Travel and Oil and Gas industries, companies likely lowered their salary budgets in 2020, with many going well below 3%. In fact, the current environment makes these challenges even more difficult. The best way to understand how your organization may need to increase pay in the future is to analyze all changes to pay throughout a complete calendar year, not just the one-time event that represents the merit pay process. The extreme labor market swings in such a short time meant that salary budget planning never really caught up to the craziness of the pandemic. While it is common for the final increases for the year and projections for the following year to change over time as organizations learn more about the factors affecting increases (e.g., unemployment, supply and demand of labor), the change typically is not this dramatic. Avg Price Recovery. All rights reserved. 2000-2002, 2008 Data: Towers Watson Database on Merit Increase Budgets taking averages of WWDS, Mercer, and World at Work Surveys Employers need to deliver a sound employee value proposition supported by comprehensive Total Rewards programs. The highest increases forecasted are in India (10.0%), Russia (8.6%), Brazil (7.5%), Mexico (6.4%) and China (6.0%). You could consider one-time payments for lower-level or lower paid employees like production workers, or targeted base salary increases or retention or recognition awards for critical or at-risk talent. Given ongoing uncertainties and the growing threat of a recession, it is important for compensation and HR professionals to thoughtfully balance the demand for higher salaries to address inflationary pressures and labor market challenges against the risk of increased and permanent cost structures. Life and health insurance: 2.7% to 3.5%. If so, then focus your actions on leveraging salary budgets to adjust any major diversity, equity and inclusion issues (including a fair pay analysis) and prioritizing in-demand and business-critical talent. This translates to an average salary increase of 9.8% in 2023, compared to the actual 9.5% increase paid out in 2022. The group's data shows that the proportion of businesses expecting to freeze pay altogether is also . Approximately 18,000 sets of responses were received from companies across 130 countries worldwide. The best place to start? 2009-Project 2011 Data: World at Work Surveys Only. With workers shortages and low unemployment, why arent we seeing higher merit budgets for the coming year? could easily be heard in the virtual hallways across corporate America second only to the question, With inflation on the rise, shouldnt we be thinking about raising salary budgets?". A quarterly newsletter containing insights and resources related to construction risk in the United Kingdom. Finally, remember other payments you may have made during the year retention bonuses or recognition awards. History shows that salary budgets dropped in prior recessions and never actually recovered to pre-recession levels, as shown in Figure 1. Labor market and inflationary pressure fueling higher-than-projected increases. The average job hopper receives a 10% - 20% increase in salary every time they move Copyright 2023 WTW. Of the organizations that reported higher 2022 projections at the end of the year, the average total increase was about 3.7% (compared to 2.9% for 2021 for the same group of companies). Dont underestimate the importance of this education and communication effort. Taking a big-picture view ensures your salary increase process is transparent and emphasizes the connection between salary increases and business performance. Limit the Use of My Sensitive Personal Information. That's according to a new survey by WTW (Willis Towers Watson, NASDAQ: WTW), a leading global advisory, broking and solutions company. We saw only moderate changes in 2021 salary budget projections when employers were planning for 2022. In fact, the tight labor market has been an influencing factor in the decision of nearly seven in 10 companies (68%) to increase salary budgets. End of main navigation menu. The Willis Towers Watson survey on salary trends stated that there will be a median increase of 9.3 per cent in salaries in 2022, as against an increase of 8.1 per cent in 2021. Among organizations that are planning to grant increases, average salary increases of 4.3% are forecasted (vs. 4.0% actual increases in 2021) for the top 15 economies in the world. It is critical for compensation professionals and organization leaders to understand the philosophical and economic factors that can and do influence compensation growth, then incorporate sound data to make defensible decisions that everyone may not like, but can live with. 10% increase in the number of unique organizations participating in WTW's 2022 general industry surveys, and a 10% overall increase in data submissions. Salaries in the Asia Pacific are likely to rise next year, according to the latest figures from Willis Towers Watson, and the increase will be the highest among regions globally. Your ability to manage risk is key to your thriving in an uncertain world. Supplemental tactics including sign-on bonuses, equity and cash retention, and recognition enhancements plus employee experience drivers such as enhanced career enablement, emphasis on mental wellbeing, focus on DEI [diversity, equity and inclusion], and learning and reskilling opportunities can combine to improve the effectiveness of a compensation program. For example, instead of trying to apply a single global plan, group countries based on their economic, labor market conditions, or statutory requirements (e.g., mandatory indexation, collective bargaining). Average actual salary increases hit 5.0% percent in 2022 as compared to 4.0% in 2021 among organizations in the top 15 largest economies in the world. Many large U.S. employers followed Amazons lead of paying hourly workers $15 per hour, even as Amazon announced that its average hourly wage would go up to $18 per hour. According to the survey, companies project average salary increases of 3.0% for executives, management and professional employees, and support staff in 2022. Thats because employees get promoted, they get counteroffers and retention monies, and equity increases. Attracting and retaining employees remains a major challenge for employers. It will be interesting to observe whether these nations are, in fact, able to maintain these levels. It will be interesting to observe whether these nations are, in fact, able to maintain these levels. Your ability to manage risk is key to your thriving in an uncertain world. The survey was conducted in October and November 2021. Being adaptable to ongoing market-condition changes is never easy, but indications show that employers are returning to a more-normal salary review cycle in 2022. Its easy to forget that several factors drive salary increase budgets and, as such, those factors should be viewed as one piece of a much larger pie. What are you trying to achieve with salary increases? While 44% of organizations reported not changing their projections from earlier in the year, almost 1 out of 4 (23%) reported that their 2022 projections are higher now than anticipated earlier in 2021. However, we have not seen a labor market like this one in quite some time if ever. In countries that are experiencing historically high inflation (e.g., U.S., UK), in addition to higher salary budgets that may still lag inflation, organizations may need more creative solutions, such as targeting by talent segment or offering one-time cost-of-living adjustments. A total of 725 UK firms took part in a global study about salary budgets and recruitment by advisory, broking, and solutions business Willis Towers Watson (WTW), which revealed that 2022's pay increase is set to be more than the 2.4% average this year. Production and manual labor employees are in line to receive average increases of 2.8% next year, higher than the average 2.5% increases this year. All rights reserved. Global Innovation and Product Development Leader, Rewards Data Intelligence, 2022 Salary Budget Planning Report Global (December Edition). see the December . However, roughly one-third of participants have revised their 2022 projections upward and the 2022 average projected increase (as opposed to median) is 3.4%. 2022-2023 is shaping up to be . Much has been written about The Great Resignation, but it appears that workers do have more leverage to demand higher pay and benefits (as well as more flexibility) than ever before. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Baird Boosts Price Target on Willis Towers Watson to $259 From $246, Maintains Outperfo.. Willis Towers Watson Public : WTW deepens investment in North American Corporate Risk & Br.. WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY, 2022 projected increases (Oct./Nov. Salary budgets are not quite as responsive to changes in the labor market as we might think. In April and May 2022, when the July Salary Budget Planning Survey was fielded, 34% of respondents across the largest economies said that their salary budget increases were higher than they had projected just a few months prior. Consider other important components of the employer-employee deal including: Your actions can range from improving the employee experience to placing a broad emphasis on diversity, equity and inclusion initiatives or implementing greater workplace flexibility. The most cited reasons for the higher projections were: Resilience tempered with cautious optimism will be the 2022 mantra for employers, with most looking to increase salaries and provide bonuses for employees particularly for critical or high-performing talent. Clients depend on us for specialized industry expertise. From determining how work gets done and how its valued to improving the health and financial wellbeing of your workforce, we add perspective. Prioritizing and segmenting increases is vital to ensure an appropriate return on investment. They also are looking at how to focus their salary budgets for the greatest impact, with 2022 projections showing that 96% of companies globally will increase salaries and far fewer will implement salary freezes than in 2021 or 2020. Our Bloomberg On-Site Support (BOS) teams provide 24/7 on-site technical solutions to Bloomberg's internal and external customers in more than 75 countries. The report provides data on actual salary budget increase percentages for the past and current years, along with projected increases for next year. The larger raises coincide with a surge in demand for labor and a shortage of supply of hourly workers and specific professional roles with premium skills. All rights reserved. Facing ongoing change in 2021, organizations around the world were forced to continually adapt and be resilient. Not only did 96% of organizations increase salaries in 2022 (vs. 63% in 2020), overall salary increase budgets and total compensation spend also rose to new levels, according to data in WTWs December 2022 Salary Budget Planning (SBP) Report. . The United States is projecting an average increase of 4.6% in 2023, which is above the 2022 average actual increase of 4.2% - the highest since 2008 - and higher than 3.1% in 2021 and 3% in 2020. WTW's latest Salary Budget Planning Report, based on a survey conducted between April and June 2021, found . Bonuses, which are generally tied to company and employee performance goals, averaged 16.0% of salary for management and professional employees. Companies are budgeting an overall average increase of 4.1 percent for 2023 Tight labor market drives U.S. employers to boost 2023 pay raises 2022 Salary Budget Planning Report - Global (July . Organizations have had to adjust their projections as global labor market challenges have unfolded. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable successand provide perspective that moves you. Whether you can expect to receive a raise or not in 2022 depends on your location in the world, according to recent forecasts by Willis Towers Watson. Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success-and provide perspective that moves you. Nearly half of companies (46%) are planning or considering improving the employee experience to address inflationary pressures and drive retention. WTW's Salary Budget Planning Report revealed that this projection for APAC is higher than last year . As inflation is forecast at 2% for next year, this is nearly a full percentage point rise . Download our salary budget planning guide. Clients depend on us for specialized industry expertise. All rights reserved. . 3.8%, 2008: 3.7%, 2009: 2.2%, 2010: 2.5%, 2011: 2.8%, 2012: 2.9%, 2013: 3%, Figure 1. With attraction and retention issues persisting, employers should consider the overall employee experience and not just salary increases, said Lesli Jennings, North America leader, Work Rewards and Careers, WTW. And in the 15 largest economies, that 2023 projection is 1.5 percentage points higher than the 4.0% actual increase in 2021 and the 5.0% average actual increase granted in 2022. managing director of work and rewards at consultancy Willis Towers Watson in Irvine, Calif. . It will be interesting to observe whether these nations are, in fact, able to maintain these levels. More than ever, making the most of your capital means solving a complex risk-and-return equation. ARLINGTON, VA, November 17, 2022 Overall salary increases in the U.S. are forecast to rise to 4.6% in 2023, up from an actual spend of 4.2% this year, as the majority of companies react to inflationary pressures (77%) and concerns over the tighter labor market . January 3, 2023. Copyright 2023 WTW. While countries where there is centralized union negotiations (e.g., Germany, Spain) or mandatory indexation (e.g. A total of 1,220 companies representing a cross section of . They also would provide compensation professionals and organization leadership a greater understanding of whats needed for the coming year (which includes those one-time merit increases) as well as a real picture for overall salary movement. 4.9% Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance. The 15 largest economies in the world are forecasting an average increase of 4.3%, which is 3 percentage points higher than the actual increase of 4.0% in 2021. Or they can utilize all of these options, especially with millions of Americans quitting their jobs, changing careers or postponing looking for employment.. of companies globally increased salaries. According to the survey, nearly three in four respondents (74%) cited the tight labor market for increasing their budgets from prior . Average US Pay Increase Projected . Industrial manufacturing: 2.6% to 3.4%. Then it completely skyrocketed when COVID-19 hit. Finally, consider other payments you may have made during the year, like retention bonuses or recognition awards. ARLINGTON, VA, November 17, 2022 Overall salary increases in the U.S. are forecast to rise to 4.6% in 2023, up from an actual spend of 4.2% this year, as the majority of companies react to inflationary pressures (77%) and concerns over the tighter labor market (68%). The United States is projecting an average increase of 4.6% in 2023, which is above the 2022 average actual increase of 4.2% the highest since 2008 and higher than 3.1% in 2021 and 3% in 2020. Salary ranges can vary widely depending on many important factors, including education, certifications, additional skills, the number of years you have .