Compensation 2025

Mercer has released the results of the November 2024 Mercer QuickPulseTM US Compensation Planning Survey of more than 850 US organizations, which reveals employers are planning to raise their compensation budgets by 3.3% for merit increases and 3.7% for total salary increases for non-unionized employees in 2025. Sixty-nine percent of surveyed employers expressed confidence in their compensation budget projections. These figures remain consistent with the actual merit and total salary increases delivered in 2024, which were 3.3% and 3.6%1, respectively.

While these planned increases are similar to last year, they remain above historical trends, confirming that employers are prioritizing talent investment even in the face of economic uncertainty.

“Amid a persistently tight labor market and low unemployment, employers are recognizing the need to invest in their workforce to drive retention,” said Lauren Mason, Mercer’s US Workforce Solutions Leader. “To remain competitive in this environment, employers will need to look beyond compensation and transform work itself to improve the employee experience and unlock greater productivity.”

The majority of employers (80 percent) indicated that they have not finalized their compensation budgets. Among those with approved compensation budgets (20 percent), their 2025 budget projections were consistent with the projections made in August for all surveyed employers, which were 3.3% for merit increases and 3.6% for total salary increases.

The survey also revealed industry variations. The technology sector reported above-average compensation budgets, with increases of 3.5% for merit and 3.8% for total compensation, while the healthcare services industry reported below-average increases for merit and total compensation of 3.0% and 3.5%, respectively.

Employers are planning to promote 9.3 percent of employees in 2025, up from 8 percent in 2024. Many employers reported a flexible approach to promotions, conducting them as needed or via two or more cycles per year. This emphasis on career and compensation progression demonstrates a commitment to retaining essential talent and skills while fostering employee engagement and loyalty.

Reflecting the move towards greater pay transparency, 18 percent of companies said they are sharing pay ranges with all employees and candidates, while another 27 percent are considering this action. The August 2024 Compensation Planning Survey revealed that 52 percent of employers plan to conduct pay equity studies to meet rising transparency demands, underscoring a strong focus on fair pay practices.

“When employers aren’t clear about pay, employees create their own narratives—and those stories can be more negative than the reality,” said Ms. Mason. “Despite significant investment in pay in recent years, employee satisfaction with fair pay is still on the decline. Companies should continue to redesign and communicate how pay decisions are made, ensuring every dollar invested closes critical gaps and contributes to a more transparent, fair and rewarding experience.”

Source: Mercer.

From WCI's HR Answers Now ©2024 CCH Incorporated and its affiliates. All rights reserved.