Workers can expect their wages to increase an average of 3.4% this year, according to a survey by WTW (Willis Towers Watson). This is higher than the previous estimate of 3.0%. In 2021, the average pay raise was 2.8%.
Employees at all levels will see pay increases, with only a slight difference between the highest projected increase of 3.4% for management, professionals, and support staff and the lowest projected increase of 3.2% for production and manual labor workers. Workers in retail and wholesale trade, finance, life and health insurance, energy, and industrial manufacturing can expect the largest salary increases compared to 2021.
The main reason companies are raising wages is because of the tight labor market — almost three-quarters (74%) of employers cited this as the driver behind increasing their salary budgets.
“There’s a great reprioritization of work, rewards and careers under way, and it’s putting significant pressure on compensation programs for many employers,” said Catherine Hartmann, North America Rewards practice leader, WTW. “As with their responses to the pandemic, employers are looking to be resilient and adaptable in their approach. For instance, as a result of recognizing that labor shortages, and not inflation, are the primary driver of growing salary budgets, many employers are targeting certain segments such as hourly workers, digital talent, and workers with in-demand skills to receive higher pay.”
However, WTW also noted that pay raises alone might not be enough to attract and retain employees. “Supplemental tactics including sign-on bonuses, equity and cash retention, and recognition enhancements plus employee experience drivers such as enhanced career enablement, emphasis on mental wellbeing, focus on DEI [diversity, equity and inclusion], and learning and reskilling opportunities can combine to improve the effectiveness of a compensation program,” said Lesli Jennings, senior director, Work & Rewards, WTW.