Salary Budgets for 2024 Increase at Historic Rates!
The recent data published in the Journal of Accountancy reveals a noteworthy trend: employee salary budgets have seen a substantial rise in 2023, marking a 4.4% increase. This surge represents the most significant growth in over two decades, potentially signaling important considerations for business owners planning their 2024 budgets.
For entrepreneurs and business owners, understanding these shifts is crucial. This increase in salary budgets not only holds immediate implications but can profoundly impact future financial planning and resource allocation.
The 4.4% surge observed in 2023, as revealed by the long-standing survey, “US Salary Increase Budgets,” conducted annually by The Conference Board since 1985, is a pivotal indicator for businesses as they consider their financial strategies.
This significant increase is notable, particularly as it surpasses levels seen before the COVID-19 pandemic. To put this into perspective, this rate hasn’t been recorded since 2001. What’s equally significant is that the same survey anticipates a continued upsurge, forecasting another 4.1% increase for 2024. However, it’s essential to remember that this forecast might change depending on market conditions and economic factors.
For clarity, the survey defines a salary increase budget as “the pool of money that an organization dedicated to base pay increases (base salary or hourly rates) for the year”. This budget does not cover employer-paid benefits, bonuses, overtime, or other additional compensation.
Salary increase budgets aren’t the whole picture. Employers plan to continue using other methods to address recruitment and retention challenges in 2024. In addition to base pay increases, employers are utilizing other vehicles in delivering competitive compensation. According to the same survey, respondents report they plan to use sign-on bonuses and retention awards, albeit at a reduced rate. However, companies are continuing to expand the inclusion of employees in short-term incentive plans and increase investment in recognition programs
Here’s the link to learn more about this: US Salary Increase Budgets 2023–2024
What does this mean for business owners and entrepreneurs?
First, it’s essential to assess your own salary budget in comparison to the companies included in the survey, which can be seen as your peers or competitors. The survey covers a wide array of industries, including Banking, Communications, Consulting Services, Diversified Financial Services, Diversified Services, Energy/Agriculture, Insurance, Manufacturing, Trade, Transportation, Utilities, and non-profit organizations. This diverse range of sectors examined in the survey offers a comprehensive overview of salary benchmarks across various industries, providing a holistic perspective on the salary landscape.
The past three years have been tough for businesses in more ways than one. It’s not just the pandemic that brought new challenges, but also for business owners dealing with employee recruitment, retention, happiness, and morale. We’ve all faced significant difficulties. Nowadays, if an employee feels unhappy or undervalued, especially in terms of compensation, it’s more likely they’ll simply leave and look for other opportunities. To address this, we need to stay competitive to retain good employees, and it seems this might cost around 4%.
Additionally, for employers concerned about retaining staff, the survey indicates some promising news. The labor market, although still tight, is showing a slight easing as job openings decrease, and fewer employees are changing jobs compared to any time since February 2020.
As per the Conference Board, the organization behind the survey, they predict a brief and mild recession with a negative turn in GDP growth expected in early 2024. Despite this, they anticipate an overall yearly growth of approximately 0.8 percent. As a result, fewer companies are expected to grow their workforce, resulting in decreased competition for workers and less pressure to raise wages compared to the previous three years.
Simply put, changes in how much companies plan to spend on salaries, who they’re hiring, and how the economy is expected to do create both challenges and chances for businesses. Adapting to these changes is important to keep employees happy and stay competitive in a job market that’s always changing. Watching these trends closely and being ready to adjust will help keep your team happy and stable in the upcoming year.
About the author, Amanda Hendren
Amanda Hendren is a seasoned professional with over 10 years of expertise in bookkeeping, Human Resources, and payroll management. As the CEO of Accountable Numbers, she leads a team of dedicated professionals in providing comprehensive financial services to businesses of all sizes. She holds a Bachelor’s degree in Accounting and a Master’s degree in Business Administration.
Amanda's passion for numbers and meticulous attention to detail have been instrumental in helping her clients maintain accurate and organized financial records. Her extensive knowledge and practical experience in accounting enable her to deliver strategic financial guidance that helps businesses optimize their operations and achieve their financial goals.