Employers continue to focus on competitive salary strategies for 2023. Over 60% of executives intend to increase compensation in response to inflation. Salary increase budgets are the pool of money available annually for base pay adjustments. While salary increase budgets are projected to grow about 4% for 2023, that is less than half of the current annual inflation rate of 8.5%.
The Consumer Price Index (CPI) increased 9.1% for the 12 month period ending in June near a 40-year high, while there was a smaller 8.5% increase for the period ending in July. If the inflation rate does not lessen in 2023, employers might feel forced to increase their salary budgets projections. However, employers might not have adequate revenues to do this if the economy continues to slow. Merit increases do not include base pay based on promotions or cost-of-living adjustments. 35% of U.S. companies are budgeting 3% and 40% are forecasting 4% or higher merit increases for 2023.
2023 pay budgets are increasing due to economic & hiring/retention pressures, inflation, and the labor market. Many employers are watching and waiting to adjust salary increases as necessary.
If you need guidance how to budget salary increases in your organization, contact us.