On Episode 99 of Comp & Coffee, host Ruth Thomas delved into the insights from Payscale’s newly released 2024-2025 Salary Budget Survey Report with Amy Stewart, Principal, Research and Insights at Payscale, and Minde Stone, Senior Director of Rewards, HR Operations, and Talent Acquisition. The discussion covered critical findings from the survey, the macroeconomic factors influencing salary budgets, and practical tips for compensation professionals as they approach the budgeting season.
Whether you’re a seasoned professional or new to compensation management, this episode offers actionable advice for planning your salary budget for 2025. Below, we’ve captured 10 key questions and answers you can use to help you put the survey to use.
1. What is the Salary Budget Survey (SBS)?
The Salary Budget Survey (SBS) is an annual report conducted by Payscale, designed to aid organizations in planning their budget for salary increases for the coming year. This survey gathers data on merit increases, COLA increases, promotional increases, and structural increases. The report is fielded to HR audiences in the spring and released in the summer and provides comprehensive segmentation by country, state, province, company size, and industry. SBS is a free and vital tool for compensation professionals to benchmark salary increases and create data-driven compensation strategies.
2. Why are salary increase budgets declining?
According to the 2024-2025 Salary Budget Survey, salary increase budgets are declining in 2025 planning due to macroeconomic factors. Post-pandemic, both competition in the labor market and inflationary pressures have eased significantly, leading to more manageable conditions for budget planning. The Great Resignation and high inflation periods of 2021-2022 heightened salary budgets; however, as these pressures subside, companies are returning to more sustainable budget increases. The planned salary increase for 2025 in the U.S. is slightly down from 3.6% in 2024 to 3.5%, reflecting a stabilization trend.
3. How do macroeconomic factors influence salary budget trends?
Macroeconomic factors such as inflation rates, labor market conditions, and interest rates play pivotal roles in influencing salary budget trends. High inflation and an overheated labor market necessitate higher salary increases to maintain competitive compensation. As inflation moderates and labor markets cool, salary budgets can be adjusted downwards. Interest rates also impact budget planning as high rates can curb economic growth, influencing organizations to adopt conservative hiring strategy and salary budgets. These factors collectively shape the strategic decisions around compensation planning.
4. What industry-specific trends are notable in the SBS?
The SBS reveals varying trends across different industries. For example, the healthcare sector faces high demand for skilled workers like nurses and lab technicians, thereby resulting in higher salary budgets to attract and retain talent. Conversely, the technology sector, inundated with job applications, shows less aggressive salary increases. Government and nonprofit organizations have also reported higher pay increase plans due to specific policy mandates and operational dynamics. Understanding industry-specific nuances can help HR leaders and compensation professionals tailor compensation strategies effectively.
5. How can organizations utilize SBS data for budget planning?
Organizations can leverage SBS data as a benchmark for informed budget planning by aligning their salary increases with reported trends and industry specifics. The data in this report helps identify whether planned increases are competitive and sufficient to attract and retain talent compared to what other organizations are planning. The survey’s segmentation by country, company size, and industry provides detailed more specific insights, enabling organizations to customize their compensation strategies based on relevant benchmarkss.
6. How does salary budget planning differ by country?
Global economic conditions significantly impact salary budget planning by influencing inflation and labor market dynamics. Post-pandemic economic recovery varies by country and some countries can expect higher or lower salary budgets as a result. For example, salary budgets are projected to be higher in Europe but lower in Canada compared to the United States. Organizations managing salaries for employees in multiple countries must account for these differences.
7. What are some alternative sources of salary budget data?
In addition to Payscale’s SBS, organizations can reference salary budget reports from other providers such as World at Work, Willis Towers Watson and Gallagher. These reports offer additional data points to cross-reference and validate salary planning strategies. Utilizing multiple sources helps organizations triangulate data, ensuring more accurate and comprehensive budget planning and compensation strategy development.
8. How can organizations address recruitment challenges amid shifting salary budgets?
Organizations need to adopt strategic approaches to manage recruitment challenges amid shifting salary budgets by prioritizing critical roles and focusing resources on high-need areas. Tactics include adjusting total compensation packages, enhancing non-monetary benefits, and refining talent acquisition strategies to align with market dynamics. It’s crucial to maintain flexibility and resilience in budget planning to adapt to unforeseen hiring challenges. Engaging key stakeholders like HR, recruitment teams, and finance departments helps balance recruitment needs with financial sustainability.
9. What key components should be part of a robust compensation strategy?
A robust compensation strategy should integrate preemptive budget planning, data-driven decision making, stakeholder engagement, and transparent communication. Organizations often prepare multiple budget scenarios to be able to adapt to shifting economic conditions. Leveraging validated market data ensures informed decisions. Inclusion of executive leadership, finance, HR, and departmental leaders helps to align compensation strategies with organizational goals and enforce consistency. Transparent communication across the organization builds employee trust and ensures clarity regarding compensation structures and programs.
10. How can organizations balance salary increases with total rewards strategies?
Base pay increases are not inclusive of total rewards . Organizations should take a strategic approach to rewards packages that include base pay, incentive pay, and benefits. This includes non-monetary benefits like healthcare and wellness , career development, flexible working conditions, vacation and sick time, and recognition programs. By diversifying reward mechanisms, organizations can enhance overall employee satisfaction and engagement, even if salary increases are modest. Understanding employee preferences and aligning rewards to meet these needs help create a balanced and effective total rewards strategy.
If you are an HR leader or compensation professional responsible for overseeing pay increases within your organization, download Payscale’s 2024-2025 Salary Budget Survey now.
If you are looking for assistance in developing your compensation strategy and structures or need access to salary data to formulate your salary increase recommendations, ask to speak to a representative about how Payscale compensation data, software, and services can help.
