Salary increase budgets in the U$.$S$.$ are projected to grow, on average, just over $4$ percent for $2023,$ less than half of the current annual inflation rate of $8\mathrm{.}5$ percent, according to new survey data. WorldatWork's Salary Budget Survey shows that salary increase budgets in the U$.$S$.$ rose to an average of $4\mathrm{.}1$ percent in $2022,$ a $20-$year high and much larger than the average $3\mathrm{.}3$ percent increase that last year's survey of total rewards professionals projected in August $2021.$ A silbsequent WorldatWork Salary Budget Quick Poll conducted in January $2022$ reported that more than half of the respondents had increased their $2022$ salary increase budget projections in the previous six months as inflation began to spike. For $2023,$ this year's survey, which closed in June and received responses from $2,445$ WorldatWork members, is forecasting that salary increase budgets will stay at an average of $4\mathrm{.}1$ percent. Companies may also have separate budgets for variable pay bonuses In the table of survey results below, the mean is the mathematical average, and the median is the middle value after listing expected budget increases in successive order. Outliers, or extreme values on either the high end or low end, have the bigger effect on the mean and less on the median, although for this data there was little difference between the two measures. Planning for $2023$The Consumer Price Index $($PI$)$ for all items increased $8\mathrm{.}5$ percent for the $12$ months ending in July a smaller figure than the $91-$percent increase for the period ending in June but still near a $40-$year high. Compensation planners may be relying on estimates that the inflation rate will continue to moderate in $2023.$ If it doesn't, employers could be pressured to raise their salary budgets projections next year, although if the economy continues to slow, they may not have sufficient revenues to do so$.$Organizations of all kinds, from global multinationals to modest enterprises, "plan salary increase budgets to maintain the workforces they need," said Sue Holloway, director of executive compensation strategy at WorldatWork. "The rapid rise in salary increase budgets over the past couple years, combined with today's volatile economic environment, challenges HR pros to leverage data and think strategically as they formulate $2023$ compensation budget recommendations and negotiate with CFOs." When asked how certain they felt about their $2023$ salary increase budget projections, nearly half of respondents felt moderately certain and just over one$-$quarter felt slightly certain. A small number $(2$ percent$)$ felt extremely certain.Forecast for Merit IncreasesCompensation survey and consulting firm Empsight's $2022$ Policies, Practices & Merit Survey report, which includes $2023$ forecasts, shows that of $259$ U$.$S$.$ companies reporting a merit increase forecast for $2023$:Approximately $35$ percent are budgeting $3$ percent.Approximately $40$ percent are forecasting $4$ percent or higher.The survey was conducted between April and July $2022.$ Merit increases are pay raises given to employees based on their performance and don't include base pay increases based on job promotions or cost$-$of$-$living adjustments. Empsight's survey projects a mean rise in merit increase budgets for all employees $($excluding zero increases$)$ of $3\mathrm{.}67$ percent and amedian increase of $3\mathrm{.}50$ percent. When including companies that are planning zero increases to their merit pay budgets next year, the mean forecasted budget increase. $($all employees$)$ falls slightly to $3\mathrm{.}59$ percent and the median stays at $3\mathrm{.}5$ percent.The labor market, inflation, and hiring and retention pressures were cited by respondents as key decision drivers in setting pay budgets for $2023,$ along with concerns over economic pressures, Empsight reported.Many respondents planning larger pay budgets next year said they intend to watch and, if warranted, reduce their budget increases if the economy slows down significantly. In addition, some said they are revising salary structures $($including pay ranges$)$ upward to achieve pay goals. According to pay data and software firm Payscale's $2022-2023$ Salary Budget Survey pay scale$-2022-2023-$salary$-$budget$-$survey$-$report.pdf U$.$S$.$ employers report, on average, a planned base salary increase of $3\mathrm{.}8$ percent in $2023.$ Among some industries, however, base salary increases reported by respondents may surpass $4\mathrm{.}5$ percent or even $5$ percent for their employees. The survey was conducted in May and June $2022$ with responses from $2,021$ employers. The top reason given for higher budget increases in $2023,$ by $85$ percent of respondents, was competition for labor.Payscale's $2023$ projections follow similar increase trends reported by the firm for $2022,$ when the average overall increase came in at $3\mathrm{.}6$ percent and surpassed $5$ percent in some segments.Consultancy WTW$\text{'}$s July Salary Budget Planning Report found that companies are budgeting an overall average increase of $41$ percent for $2023,$ compared with the average actual $4$ percent increase in $2022.$ The survey was conducted in April and May $2022.$ In the U$.$S$.,1,430$ organizations responded.Compensation data and analytics firm Salary.com's Annual National Salary Budget Survey shows that $48$ percent of U$.$S$.$ employers are planning higher year$-$over$-$year salary increase budgets for $2023($with a median raise of $4$ percent across all employee categories$),$ continuing an upswing that began in $2022.$ A quarter of employers plan to give increases in the range of $5$ to $7$ percent. Salary.com conducted the survey of more than $1,000$ organizations in June of $2022.$ Actual Pay Growth Exceeded Salary BudgetsSalary$-$Increase budget data may not take into account unbudgeted and off$-$cycle base pay increases, which were significant this year due to inflation. Also, because of the tight labor market, new hires are frequently offered higher salaries than current employees in similar positions. These and other factors can cause salary budgets to be less than the actual rise in compensation paid by employers.For instance, according to payroll and HR software and services firm ADP's latest National Employment Report Jobs$-$in$-$August$-$Annual$-$Pay$-$was$-$Up$-7-6),$ released Aug. $31,$ the year$-$over$-$year change in annual pay by U$.$S$.$ employers was up $7\mathrm{.}6$ percent in August. The report used ADP's aggregated payroll data of over $25$ million U$.$S$.$ employees.U$.$S$.$ government reports have placed the overall rate of rising pay somewhat lower. The Bureau of Labor Statistics $($BLS$),$ for instance, reported that wages and salaries for private$-$sector workers rose $5\mathrm{.}7$ percent for the $12-$month period ending in June up from a $3\mathrm{.}5$ percent increase a year earlier, in its quarterly Economic Cost Index summary.Growth in hourly wages has exceed salary raises this year. For full$-$time hourly employees, the Federal Reserve Bank of Atlanta tracked $6\mathrm{.}7$ percent hourly wage growth for the $12$ months ending in August.Adjusting for inflation, however, "real" average hourly earnings fell $3$ percent from July $2021$ to July $2022,$ the BLS reported in August.planning for $2023$ Budget.

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