Why Promotions and Raises may be Harder to Get in 2024
Economic uncertainty is causing organizations and employers to rethink their budgets and tighten their purse strings. The Commerce Department reported that the economy expanded by 1.6% last quarter, which was far less than predicted. Inflation also remains a concern, and Federal Reserve officials "will not cut interest rates until inflation is definitively headed back to their target," said Scott Hoyt, senior director at Moody’s Analytics.
Businesses’ total salary budgets, including money for pay increases, were 3.6% in the first quarter of 2024, down from 4.1% in 2023, according to the 2024 Mercer Quick Pulse-US Compensation Planning Survey. More specifically, the average pay increase was 3.3% across over 1,000 U.S. organizations in 15 industries surveyed by the HR consulting firm.
The highest average pay increases were found in the transportation industry, with increases at 3.9%. The second highest average pay increases were in the services (non-financial), mining & metals, consumer goods, and chemicals industries, with average pay increases at 3.6%. On the other end of the spectrum, healthcare services and retail & wholesale provided a 2.9% average pay increase.
Promotions are also at risk, as employers have "promoted or are planning to promote a smaller percentage of employees in 2024—8.0% on average of all employees (down from 9.3% projected in November 2023)."
Employers are considering other benefits and programs to retain employees since budgets are limited. Mercer identified the following compensatory measures:
Off-cycle salary increases, additional compensation not tied to annual performance reviews
Student loan assistance
Mental health stipends
Professional development programs
Flexible hours
Additional paid time off
“While preliminary compensation budgets for 2024 have shown a slight decline, they still remain significantly higher than pre-pandemic levels, reflecting the continued tightness of the labor market and low unemployment rates,” explained Michael Citron, a compensation and rewards consultant at Mercer.