Insights from the WTW 2024 Salary Budget Planning Report, December edition
As we transition into 2025, organizations around the world are recalibrating their compensation strategies in response to a shifting economic landscape. The December 2024 edition of WTW’s Salary Budget Planning Report provides crucial insights into these adjustments, reflecting a period of stabilization in key markets after years of aggressive salary growth. The report also offers three pivotal trends that compensation and HR professionals should consider in their strategic planning.
01
The era of rapid salary budget escalations reached its zenith in 2023, with 2024 projections for 2025 indicating a move toward stabilization. This reveals a significant shift in how companies are approaching salary planning.
From a global perspective, salary increments surged after the Great Resignation due to competitive pressures in the job market. However, the latest report suggests that this trajectory is leveling out. This overall trend shows a dialing back from aggressive increases, with a noticeable move toward more sustainable — albeit still elevated — salary growth rates.
However, while there is a general trend toward stabilization, the dynamics vary by region (Figure 1):
02
The report also underscores a shift in organizational focus from aggressive hiring to stabilizing current workforce levels, reflecting a strategic pivot toward optimizing existing talent rather than expanding teams:
There also is a notable decline in concern regarding talent attraction and retention (Figure 2). Nearly 40% of respondents expressed minimal concern in these areas, with only 32% feeling moderately or greatly worried. This shift indicates that many organizations believe they have reached a saturation point in their talent pools or, perhaps, the market dynamics have slightly shifted the power balance back toward employers.
03
Despite the stabilization in salary growth, economic concerns continue to shape organizational strategies, leading to varied responses across regions. For example, inflation, cost management and the looming threat of recession are cited as top priorities around the world. And these concerns drive a careful approach to compensation planning.
In response, organizations remain focused on thorough compensation reviews to ensure internal equity and external competitiveness while making the best use of budgeted salary increases. In addition, a significant portion of organizations in Canada (44%) and the United Kingdom (42%) are not just reviewing compensation, they also are focused on hiring at higher points within ranges. This strategy might be aimed at attracting top talent or compensating for higher living costs or market rate adjustments in these regions (Figure 3).
Action taken | Action planned | |||
---|---|---|---|---|
Brazil | Compensation review of specific employee group | 38% | Full compensation review of all employees | 31% |
Canada | Hire people higher in relevant salary range | 44% | Adjust salary ranges more aggressively | 26% |
China | Full compensation review of all employees | 44% | Adjust salary ranges more aggressively | 26% |
France | Full compensation review of all employees | 39% | Full compensation review of all employees | 27% |
Germany | Full compensation review of all employees | 40% | Full compensation review of all employees | 27% |
Saudi Arabia | Enhance use of retention bonuses or spot awards / compensation review of specific employee groups |
37% | Full compensation review of all employees | 30% |
United Kingdom | Hire people higher in relevant salary range | 42% | Full compensation review of all employees | 30% |
United States | Compensation review of specific employee group | 48% | Full compensation review of all employees | 27% |
Insights from the December 2024 Salary Budget Planning Report offer several strategic implications:
In short, the stabilization of salary budgets after an aggressive growth phase offers both a challenge and an opportunity. The challenge lies in managing expectations around salary growth while ensuring market competitiveness.
The opportunity, however, is in crafting more holistic, strategic approaches to talent management that extend beyond salary alone. Engaging employees through meaningful work, career progression and a supportive work culture could become the new battleground for talent in this stabilized economic phase.
The insights from WTW’s Salary Budget Planning Report serve as a compass for navigating these waters, ensuring that organizations not only adapt to current trends, but also position themselves advantageously for future shifts in the global employment landscape.