Pay raises might be slightly harder to get in 2024. There’s been some recent softening in the labor market — even though unemployment is still low, new job growth is slowing down. And employers might be tightening their purse strings.
According to December 2023 data from the Mercer QuickPulseTM – U.S. Compensation Planning Survey, U.S. employers are planning to increase their budgets for pay raises by an average of 3.8% for total compensation increases and 3.5% for merit increases. The average budget for total compensation increases is down slightly from 3.9% earlier in the year. However, there could be better chances of a pay raise for certain industries and for people getting promoted.
What does this mean for your pay raise in 2024? Let’s look at some surprising stats about the current landscape of pay raises and how you can boost your pay and improve your personal finances.
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The Mercer survey found that employers are planning to promote about 10% of the total workforce in 2024. Half of employers have an existing salary and wages budget or usual expense process that they use to cover pay increases for promotions.
What this means for your pay raise in 2024: Getting promoted is not some rare, impossible, unheard of event! Lots of people work hard every day and deserve a chance to move up. About 1 out of 10 workers nationwide can expect a promotion in 2024, and 50% of employers already have promotions built into the budget. Don’t assume that your company “can’t afford” to promote you or give you a pay raise; it’s part of the cost of doing business, and businesses are planning for it.
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According to the Mercer survey, the average pay increase for a one-level promotion is expected to be 9.2%. So for example, if your current salary is $60,000 per year and you get an average promotion, you should expect your new salary after the promotion (and pay hike) to be about $65,520.
What this means for your pay raise in 2024: If you’ve been taking on extra responsibilities, covering for absent colleagues, and generally holding the universe together at your company, 2024 could be a good time to ask your manager for a promotion. Ask for a bigger pay raise, a new job title, and the other perks of moving up at the company. Remember: 9.2% is just the average pay raise for a promotion. Some people could get a lot more than that.
3. 50% of employers were planning off-cycle pay raises in 2023
In a typical year as an employee, at many companies and organizations, you get an annual performance review and an annual pay raise. Your pay raise will be based on how you’re performing at your job, how your employer is doing, the state of the global economy and your industry, your department’s budget, and more.
But when the job market is strong, like it was in 2022 and 2023, companies get nervous about losing good people to other employers. And they might be more likely to offer “off-cycle” pay raises — pay increases that happen outside of the usual annual review timeframe. The Mercer survey found that about 50% of employers were planning to give (or had already given) off-cycle pay raises in 2023. Here are the biggest reasons why employers are giving out off-cycle pay raises.
Employers are concerned about pay equity and making sure they are paying people fairly within the company — not accidentally (or as an act of potentially illegal discrimination) underpaying any teams or individuals. Sometimes off-cycle pay raises happen within organizations to help rebalance the scales and provide fairer pay for everyone.
As the job market shifts, some employees and skill sets become more valuable. If a company finds out that its biggest competitor is hiking pay by 8% for all employees in a certain job class, that means a 4% pay raise isn’t good enough anymore. Employers will often adjust their pay offers during the year if that’s what it takes to keep the right people with in-demand skills.
With the past few years of talent shortages and “the Great Resignation,” companies are concerned about keeping top performers. If you’re good at your job and your skills are in demand, your company doesn’t want you to quit. You have options to go get hired by another company or organization, and your boss knows it.
What this means for your pay raise in 2024: Smart employers are constantly trying to think ahead to retain good people — to keep their best performers happy with the company and working hard. Retention bonuses and off-cycle salary increases could be part of your pay raise in 2024.
Don’t assume that you don’t deserve a bigger pay raise or that your employer can’t afford to pay you more. Even with global economic uncertainty, many employers are planning for sizable pay raises in 2024. Your manager and your organization might value you more highly than you think. And right now, with a strong job market, employees have more power than they realize. Don’t give that power away. Have a cordial, open conversation with your boss. Ask for what you deserve, stick up for yourself, and show how you add value and exceed expectations. You’ll be more likely to get a big pay raise — and more money in your bank account — in 2024.
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