How much will large corporations increase the average base pay in 2025?
Corporate America is planning to increase their base salary budgets by nearly 4% on average in 2025 focusing on retaining workers as the supply shrinks.
A recent survey of 300 compensation leaders in the United States found that Corporate America plans to continue to increase salary budgets close to the fastest pace in two decades. The survey conducted by The Conference Board across 11 industries revealed that large companies are planning for a 3.9% increase to the base pay budgets.
That is less than the actual 4.4% hike in 2023 but an improvement from the 3.8% increase this year. Typically increases in compensation budgets are viewed as a good proxy for the average raise employees could receive in a given year.
How much will large corporations increase the average base pay in 2025?
“Despite a slower pace of hiring and slight increases in unemployment, elevated wages are expected to continue into 2025,” Conference Board chief economist Dana Peterson said in a statement. “A shrinking labor supply is driving businesses to focus on retaining their current workforce, leading to sustained salary increases and higher real wage growth as inflation moderates.”
Companies that project the highest overall increases can be found in insurance, energy & agriculture and communications according to the Conference Board report. Those in trade and diversified services reported the lowest planned overall increases.
US corporation are adjusting compensation strategies
“To remain competitive and responsive to market dynamics, employers need to adjust their compensation strategies. Given fluctuating market conditions, leaders are increasing their use of compensation strategies that aren’t tied to base pay, like performance initiatives and other strategic priorities,” said Diana Scott, US Human Capital Center Leader at The Conference Board.
While many companies continue to rely on short-term incentives to attract workers and retain current talent they are losing momentum. Despite the tight labor market more companies on net plan to stop offering one-time bonuses for new hires or to retain current talent.
Instead, in 2025 recognition programs and equity compensation will gain momentum with 14% more companies planning to leverage the former and 6% the latter. “This indicates a balancing act between salary and wage pressures and performance-based and budget-flexible compensation strategies,” said the non-partisan think tank.