Budgets are getting bigger in 2023, and there are a lot more financial developments on the horizon for the new year. Here’s what to know about the state of salary budgets heading into 2023.
According to Salary.com’s Annual National Salary Budget Survey, the “traditional” 3% annual raise is being edged out by a new standard: the 4% raise – and a corresponding increase in salary budgets is also on its way. The survey, conducted in June 2022 and encompassing responses from over 1,000 organizations, found that 48% of U.S. employers are planning higher year-over-year salary increase budgets for 2023, building on the trend from 2022. Some employers are going even further: around 25% of employers are planning to give 2023 raises in between 5% and 7%.
Three main types of budget increases are playing a part in the planned budgets for 2023: general increases, merit increases, and equity/market adjustments. For U.S. employers, these plans (both median and mean numbers) break down as follows:
- General increases:5% planned median increase, 2.3% planned mean increase
- Merit increases:5% planned median increase, 3.4% planned mean increase
- Equity/market adjustments:0% planned median increase, 1.5% planned mean increase
- Total increases:0% planned median increase, 4.4% planned mean increase
Compared to 2022, companies are looking at 2023 as a chance to improve on previous pay increases. 42.5% say their salary budgets will be higher than 2022, and 5.5% say their budgets will be “significantly” higher. 38% report their budgets will stay about the same, 12.7% report lower budgets, and only 1.4% say their budgets will be significantly lower than 2022.
The survey also breaks down some important information on how planned increases stacked up to reality in 2022, possibly previewing the year to come. In 2022, cost of living increases went about 2% for the first time in years, with smaller organizations giving higher increases (between 2.5% and 2.7%) than larger ones.
Increases also varied according to business sector. Healthcare, for instance, saw closer to a 3% increase, less than the overall U.S. median of 4%. It’s a double-edged sword: healthcare workers continue to face immense demands and burnout, and many are leaving the profession, but pay is also affected or even capped by insurance reimbursement limits.
2023 is shaping up to be another year of high competition for top talent, and salary budgets will play a major role in determining which organizations succeed. For more detailed insights, you can get the whole report at Salary.com now.
By Tom Zeleny, NHA