As companies navigate economic shifts, Mercer’s QuickPulse® US Compensation Planning Survey highlights a decline in anticipated salary increases in 2025, marking a trend toward pre-pandemic norms. The surveyed firms reported average merit increases at 3.2% and total raises averaging 3.5%, falling short of earlier predictions of 3.3% and 3.7%, respectively. This moderation points to a softer labor market, prompting businesses to prioritize high-performance rewards over broad pay hikes amidst economic uncertainty.
The survey indicates an increase in workforce promotions, expected to reach 10%, up from last year’s 8%, with an average raise of 8.5% for promoted individuals. Top performers are set to receive average raises of 5.6% compared to 3.3% for median performers, reflecting a tiered performance compensation system. This strategic shift emerges as companies confront tighter budget constraints influencing pay decisions.
Beyond simple wage hikes, a diverse compensation strategy has gained traction, particularly for hourly workers. The emphasis lies on integrated benefits, career growth pathways, and fostering positive work environments to enhance employee satisfaction and loyalty. PayScale and ZipRecruiter reports illustrate rising tensions due to disparity between employers’ budget limitations and employees’ expectations for fair pay, with recent graduates facing significant gaps between expected and actual salaries. Employers are urged to adapt their compensation strategies, considering evolving workforce expectations amidst ongoing economic conditions.
