U.S. Salary Budgets Expected to Remain the Same in 2025

Although fewer organizations report difficulty with attraction and retention, salary increase budgets at U.S. companies are projected to remain at the same level as last year. While salary increase budgets are stabilizing, with 2025 planned increases projected to be at 3.7% on average compared with the 3.8% average budget awarded in 2024, they remain higher than the pre-pandemic norm of 3%. This is according to the latest Salary Budget Planning Report by WTW, a leading global advisory, broking, and solutions company.  

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Despite a conservative outlook for 2025, salary increases remain at a healthy rate by historic standards and amid higher payroll expenses—which include salaries, bonuses, variable pay, and benefit costs. According to WTW’s survey findings, the average increase in payroll for respondents was 5.5% in 2024.  

For those companies planning to reduce salary increase budgets, weaker financial results (36%) and cost management concerns (34%) were the most commonly cited reasons. For those planning to increase salary budgets, inflationary pressures (39%) and tight labor market concerns (31%) were the most common factors. 

Steady and improved pay increases are indicative of organizations’ investment in talent. Overall, fewer organizations (36%) reported difficulty in attracting and retaining employees, down nine percentage points from last year and 17 percentage points from the prior year.  

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“Although salary is crucial for employees, other elements—such as healthcare and retirement benefits, new challenges, work flexibility, and meaningful contributions—are significant as well. Companies should consistently evaluate their comprehensive offerings, focusing on workplace culture, communication, and a holistic approach to benefits and rewards,” says Russ Wakelin, head of global product development within rewards data intelligence at WTW.  

As organizations focus on their workforces, many have taken action to improve workplace culture in light of current market conditions. For instance, more than half (54%) have placed broader emphasis on diversity, equity, and inclusion, and just as many (53%) have taken steps to improve the employee experience. In addition, 48% are incorporating more workforce flexibility. More than half (52%) of organizations offer or are planning to offer the choice of remote, on-site, or hybrid work arrangements.  

“The U.S. labor market has stabilized because demand for talent dropped significantly from the prior three years. But supply has not changed, which is why the labor market still has vulnerabilities,” says Lori Wisper, global solutions leader of work and rewards at WTW. “Employers planning to lower salary increases closer to the 3% we saw for the decade before 2022 should understand that the competition for talent is still fairly strong, especially in certain industries. The focus should now be on retention, so spending the salary increase budget wisely to manage potential undesired attrition if demand was to pick up in 2025 is critical to future-proofing your workforce.”