Uncover Mercer’s U.S. Compensation Planning Survey results 

In August 2024, we surveyed more than 1,000 participants to collect information about how employers are planning and administering their annual compensation programs. This sample size is large enough to glean insights across multiple industries, which HR and strategic business leaders can use to guide decisions, make projections, and set budgets for 2025.

• Supply and demand of talent drives compensation: Tightness in the labor market has raised compensation budgets in the past, but in 2024, companies reduced them and 2025 salary budgets are projected to hold steady.
• Overall market movement is showing a return to normalcy: 2022 and 2023 showed significant out-of-cycle activity and fast-moving jobs, but a decrease in pressure to attract and retain talent has cooled off-cycle salary adjustments and merit spending overall.
• Preliminary budgets may not stick: Preliminary salary increase budgets are still elevated from 2019 pre-pandemic levels, though 86% of clients reported they are still early in the budget planning process (as of August 2024). Among the 5% of clients who have already approved their 2025 salary budgets, the approved budgets are lower than what was proposed. 

The traditional merit process of the ‘peanut butter spread’ is outdated and no longer effective—and it perpetuates existing pay gaps by allocating the same budget across the board rather than making decisions that align with gaps and business needs. Employers should reevaluate compensation decision-making with a fit-for-purpose design:  use a data-driven approach to set smart budgets, set budgets based on needs and costs that eliminates ineffective spend, provide managers the data to be effective and unbiased, and mitigate risks by proactively embedding pay equity into the entire process. 

In frontline sectors, job demand is still above pre-pandemic levels while demand for workers in the software and IT sectors has dropped well below 2020 levels. High demand for frontline workers coupled with the highest quit rates has led to the largest salary increases: of the 24 job families in the Mercer Job Library, five out of the top six largest 2024 salary increases were job families with heavy frontline workforce populations. 

Transparent pay has proven to be a critical competitive advantage for proactive employers—employees at these companies are 60% more committed to the organization and 82% more engaged in their work.

As market pressures around pay transparency grow due to broadening legislation and shifting employee expectations, employers are responding. They are taking action on their pay philosophy, pay equity, salary structures, and job architecture.  Pay equity, in particular, is in the spotlight with increasing pay transparency—68% of employers are now conducting pay equity analyses on a regular basis.

Mercer’s Merit Co-Pilot

Accelerate your end of year compensation planning and merit processing with a custom Co-Pilot to support your organization.

Use Mercer’s custom tool to make smart, instant compensation decisions. Powered by AI, algorithms, and pay equity analysis, Co-Pilot provides personalized & individual recommendations for each employee’s compensation. 

Learn more here.

We help clients drive their performance through talent. From strategy to implementation, we work closely with our clients to help them:

• Reward performance
• Organize their workforce
• Engage their employees
• Modernize talent practices
• Maximize their HRIS investments
• Communicate effectively 

Providing the most comprehensive data, consulting services and analytical tools to help organizations with all their talent needs, keeping them ahead of the market.