Lower Pay Raises Incoming for 2025

CompensationEmployee BenefitsManagement
Written By Alex Santos

Employers in the U.S. are planning lower pay raises for 2025 due to cooling inflation and job markets, according to new reports. In 2024, roughly 47% of organizations reduced salary budgets compared to 2023, with the overall median pay raise dropping to 4.1%. For 2025, projections show a further dip to 3.9-4% in salary increase budgets. The stabilizing economy and reduced difficulty in attracting and retaining talent are influencing these tighter budgets.

Lower pay increases can slow consumer spending, as workers have less disposable income. This can, in turn, reduce demand for goods and services, potentially slowing economic growth. It might also lead to lower employee morale and productivity, impacting business efficiency. Over time, reduced spending and investment can affect overall economic stability and growth prospects.

Sydney Ross of SHRM noted that inflation has softened to 3% and the labor market is balancing out. Lower salary budgets are often driven by cost concerns. Despite declining, salary increases remain higher than pre-pandemic levels. Companies are also focusing on non-monetary rewards like flexible work policies and engagement programs to retain employees. Organizations aim to address market conditions with more holistic reward programs, including bonuses and health benefits. Prioritizing pay equity remains crucial.

Employers are adapting to the new economic reality by providing workplace flexibility and improving employee experience to manage costs effectively.

How about your company, are you planning for lower pay increases for your employees?

Alex Santos
As Managing Member of Collabor8 Learning, my role is to build and execute learning and development strategies for organizations seeking to improve the return they are getting from their training programs. We focus on four core areas: performance analysis, instructional design, e-learning development, and learning management. As a hybrid HR/instructional design consultancy, Collabor8 Learning partners with your team to leverage today's training technologies to increase the productivity of your people. I am a senior human resources and training executive with over 17 years of progressive experience. My work in private industry has focused heavily on the development of learning and development systems that transform employee performance from ordinary, to remarkable. I accomplish this by combining organizational development strategies and tactics to blended learning programs with line of sight alignment to clearly defined performance goals. Additionally, I launched Miami Payroll Center in conjunction with my brother and sister-in-law in 2004 to meet the payroll needs of small to mid-size organizations. Our consultative approach to guiding new entrepreneurs as well as more seasoned business owners in alleviating the pain of payroll processing has created a very successful and growing payroll processor in the market. Specialties: Instructional Systems Design, E-Learning, Learning Management Systems, Payroll, Organizational Development, Employee engagement, HR Strategic Planning, Talent Acquisition & Management, Leadership Development, Coaching & Mentoring, Employment Branding Proposition & Positioning, Workforce Planning, Performance Management, and Leadership Development.
https://www.bynimble.com
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