Business

Get ready for bigger paychecks: Record high increases expected in 2023

(CNN) — Employers are planning to increase their salary budgets by 4.6% next year, the highest expected annual jump in 15 years.

That’s according to the latest international survey from consulting firm Willis Towers Watson, which included responses from 1,550 US employers. The survey was conducted from October 3 to November 4.

A large majority of the organizations attributed the big bump to inflation and a tight labor market.

But with headline inflation still at 7.7%, any raise an employee gets below those levels effectively means they will be earning less because their paycheck won’t buy as much.

Often what companies expect to pay more for a given year and what they end up paying differs based on market conditions. This year, for instance, 70% of organizations surveyed by Willis Towers Watson said they spent more than they originally planned. Overall, employers ended up spending 4.2% more on salaries this year than in 2021.

What does that mean for your raise?

Employers indicated they will use a host of ways to fund bigger salary increases next year: 21% said they would reassess their total rewards package to ensure it has the biggest impact on retention and engagement; 17% said raise prices; and 12% said restructure and reduce headcount.

How employers will distribute the additional funding for salaries won’t be even across the board.

Some workers will get much higher than the average. It will depend on several factors, such as employee performance and the going market rate for a position, which may require upward adjustments for existing staff. New pay transparency laws will add to the pressure to offer those adjustments.

And, as always, those whose skills are most in demand are likely to see the biggest pay hikes, said Carolina Valencia, a vice president in the human resource practice at Gartner. “Certain jobs will get a disproportionate share [of the salary budget increase] because they are critical or difficult to hire for.”

Gartner is expecting even larger pay increases next year. Its survey of employers, conducted in September and October, found that organizations in North America expect to offer merit increases of 7% on average.