Show me more money.
Employers are planning to bump up salaries by an average of 4.6% next year — the most since 2007, according to a new Willis Tower Watson (WTW) survey of 1,550 U.S. companies. More than three-quarters have adjusted or are considering adjusting salary ranges more aggressively, increasing pay ranges by 2% to 5%, according to the survey.
But that may not be enough to keep workers happy. A separate study this week from SHRM Research Institute found that most of the 1,500 HR professionals surveyed said it would take 8% to 10% pay raises to retain workers.
The disconnect highlights the ongoing tug-of-war between employers and employees that started when the labor market roared back from the pandemic last year.
“It is clear that most companies cannot or will not commit to 8% to 10% pay raises for next year. In fact, pay raises in most companies seem to be only slightly higher than traditional raises from recent years,” Mark Smith, director of HR Thought Leadership at the SHRM Research Institute, told Yahoo Money.
“We have seen somewhat higher pay rates extend to new hires, which is good for the worker who is willing to jump ship. The downside is that loyal employees who have chosen to stay in their organization seem to be missing out,” he added.
Still, the 4.6% average increase in pay is the biggest in 15 years, Hatti Johansson, research director of WTW’s Reward Data Intelligence, told Yahoo Money, spurred by a persistently tight job market and lingering high inflation.
“Salary budgets have remained stable around 3% for the last decade. A 1% to 1.5% jump (from roughly 3% to roughly 4.5%) is a huge increase and for most companies represents hundreds of millions of dollars,” Johansson said.
Pay budgets already jumped 4.2% this year, according to the WTW findings, with more than two-thirds of companies spending “more than they planned on pay adjustments in 2022.”
Mid-year salary raises flipped from rare to routine as well.
The biggest reason for upping pay is that 3 in 4 respondents said they’re having trouble recruiting and retaining talent, a figure that’s nearly tripled since 2020. Four in 10 HR professionals in the U.S. said the biggest reason employees are exiting their jobs is inadequate compensation.
The other top reasons cited for the departures were lack of career development and advancement, which was listed in the top three by 61% of HR professionals and as the top reason by 21%, and lack of workplace flexibility, which was in the top three reasons for 43% of HR professionals and the top reason for 13%.
Compensation, work/life balance, flexible work arrangements and upskilling also top the list of things that candidates are looking for from today’s employers, according to LinkedIn’s Global Talent Trends report.
“In order to retain talent, organizations need to use multiple actions to keep their employees (not just base salary increases),” Johansson said. “This may range from improving the employee experience, to broader emphasis on diversity, equity and inclusion or more workplace flexibility. In addition, they may need a more targeted approach to retain specific employee groups by offering retention bonuses or spot awards or adjusting salary ranges more aggressively.”
As a result, two-thirds of employers(67%) have provided more workplace flexibility this year, while 61% have already put a broader emphasis on diversity, equity, and inclusion (DEI), according to the survey findings.
“Given how much the world of work has changed, employees are demanding more from employers than ever before,” Rand Ghayad, head of economics and global labor markets at LinkedIn, told Yahoo Money. “More than ever, companies must redefine their attraction and retention strategies and build a value proposition that takes employees’ whole lives into account.”
Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter @kerryhannon