A recent press release by WTW revealed their Salary Budget Survey findings that included the forecasting of salary budgets in 2024. Based on their survey, they have discovered that UK employers are lowering their average salary increase budgets to 4.4% in 2024, down from the 2023 number of 5.1%.
This decrease is largely due to economic challenges that are happening from continued inflation, causing many businesses to be on a tighter budget in the near future. Further, labour market challenges, changes in employee expectations, anticipation of a recession and changes in management costs are also mentioned as contributors to the changes in salary budgets.
WTW’s Salary Budget Survey
WTW’s Rewards Data Intelligence practice compiled the Salary Budget Planning Report, which includes data from a survey conducted in April and May 2023. The survey gathered approximately 33,000 responses from companies spanning 150 countries globally. In the UK alone, 3,142 organizations participated and provided their input.
From this report, it was found that amongst the UK companies surveyed, 71% admitted that inflationary pressure is the main reason they are cutting down salary budgets. Other than that, 54% blamed the tighter labour market, 27% employee expectations, 23% anticipated recession and 20% management cost concerns.
The survey further delved into the concern on talent, specifically employee retention and attraction as 46% of employers are facing difficulties in that area. However, only 32% expect to face these challenges in 2024.
In discussing current issues, employers are taking steps to improve employee retention and attract new talent. 37% have raised the starting salaries in the hope to attract new talent and also conducted a full compensation review for all employees. Further, more efforts have also been done for retention such as increasing base salaries (36%), hiring talent in the right salary ranges (35%), targeted base salary increases (34%) and an improvement of retention bonus usage (27%).
They also reported the implementation of non-monetary feedback for employees such as the introduction of more workplace flexibility which has been done by 58% of UK workplaces surveyed. A rising agenda for many businesses have been improving diversity, equity and inclusion (DEI) which has been done by 57% of the companies. Additionally, improving the experience of employees has been the objective of 41% of businesses.
Other benefits introduced included health and wellness (35%), modification of compensation schemes (29%), and increased training opportunities (26%). In general, 44% have reported an increase in funding for compensation spend – which is a significant difference from 2022 which is 22%.
Paul Richards, UK Reward Data Intelligence Leader at WTW noted, “While we are seeing lower salary increases forecasted for next year, they’re still well above the ones we’ve seen for the last 10 years. This shows that companies are striving to stay competitive in a dynamic work climate.”
“Those companies that have a clear compensation strategy, as well as a good understanding of the factors affecting it, will be more successful attracting and retaining employees while keeping pace with an evolving environment in which yesterday’s certainties no longer apply.”
Further, he remarked, “As workforces become more diverse, demanding and dynamic, the key is understanding their specific needs and preferences while providing the desired employee experience and careers within the company.”