New research has found that employers throughout the UK and the US have become more conservative with salary budgets this year.

Nearly half (49%) of UK employers reported lower salary budgets for the 2024 cycle compared to the previous year.

It’s a similar story in the US, where 46% of employers also reported lower budgets.

Those are the findings of WTW’s Salary Budget Planning Report, based on 32000 responses from companies across 168 countries worldwide, which found the overall median pay rise for 2024 fell to 4.6%, compared 5.3% in 2023.

Overall, salary budget increases are expected to rise by 4% in 2025 which, despite consistently declining since 2023, “remain fairly high” WTW stated.

Following the end of a period of high resignation and turnover, employers are now seeking longer term stability amongst their employees.

Talent acquisition has historically been a thorn in the side of organizations seeking to reduce turmoil and cost in their employee base, however that trend appears to be reducing.

WTW found that while two in three (39%) of employers reported trouble in attracting and retaining, this has decreased from 48% in 2022.

Taking a wider view beyond financial incentives

Respondents from the UK that indicated lower salary budgets cited inflationary pressures, concerns related to cost management and weaker financial results as the leading causes.

Meanwhile, employers that recorded higher salary budgets pointed to inflationary pressures and a tight labor market.

In response, 45% of companies that have made changes or are planning changes to compensation programs or workplace flexibility have undertaken a full compensation review of all employees.

Meanwhile 42% have raised starting salary ranges and a similar percentage (41%) have reviewed compensation for specific groups.

In addition, employers are taking actions to address current market conditions and employee needs, WTW found.

This is particularly evident in employers placing broader emphasis on diversity, equity and inclusion, more workplace flexibility and improving the employee experience.

Commenting on the results, WTW Senior Director and Practice Leader Ruchi Arora tells UNLEASH that when salary budgets are tight, it becomes “key for employees and HR leaders to ensure they are talking to the employees about the full total rewards offer, and not just focused on base pay.

“While base pay is a key attraction and retention factor, so are other factors such as career development opportunities, opportunities to re-skill/upskill, learning and development, broader benefits including flexible working.

It is critical leaders can articulate the overall offerings and their value to their employees.”