Pay Raises Are Coming: What It Means

This is the 12th year Salary.com has surveyed employers in the US and Canada to learn about their plans for salary increases.

We ask about budget and planning pay raises including merit raises, market adjustments, and cost-of-living increases. We also look at past differences between what organizations planned and what ultimately happened. Although they are usually close, the world has upended plenty of well-laid plans over the past few years.

Based on the 2023 budgets for our survey respondents, employees can expect pay raises around 4%.

Types of Pay Raises

The aggregate results were:

Merit increases are still the primary basis for pay raises, but we're seeing organizations respond to economic conditions with market adjustments as well.

Who is getting pay raises?

This one was easy. Everybody is getting a pay raise and the average pay raise is the same percentage increase across all employee categories (although the amounts are going to be different depending on what someone's current salary is).

More than 42% of organizations indicated their salary budget will be higher for 2023 than 2022, with an additional 5.5% saying the budget would be "significantly higher." Thirty-eight percent said there would be no change. And only 14.1% said their salary budget was lower for 2023.

Higher increases are becoming a trend since actual 2022 salaries were both higher and more organizations gave increases than they originally planned.

"For perspective, in 2020, as the pandemic was taking hold, just under 10% of employers planned a higher salary budget increase from the 2019 increase," said Chris Fusco, Senior VP of Compensation at Salary.com. "In 2023, nearly half of employers are planning higher salary budgets."

What it means

Given ongoing labor shortages and inflation, we weren't surprised that employers are increasing wages to attract and retain employees.

"With unemployment low, there are skilled and unskilled roles that are going unfilled. That's putting a lot of pressure on the starting rates for those jobs," said Dave Turetsky, Salary.com's VP of Consulting,

In response, we are seeing the average pay raise increase from 3%, where it's been for about 10 years, to 4% or more.

In addition, the job changes that followed the pandemic shut down seem to be shifting and more people are staying put, but also want some of the financial benefits of changing jobs.

"We usually see job-switchers get large pay increases when they go to other places. Now, we're seeing stayers, people who stay but are saying 'Well, what about me?' The higher increases are for the job-stayers," Turetsky said.

To learn more about Salary.com's US and Canada National Salary Budget Survey, including more detailed information on geography, industry, variable pay and salary structures, and when organizations usually give compensation increases, you can download the full report here, or participate in the next National Salary Budge Survey.