Paycheck Increases For 2024: What Can Employers Expect?

Blue Whale has prepared the following summary advisory report on the current market and economic conditions to provide insights into how these factors may impact companies’ decisions regarding merit and pay increases in 2024.

U.S. Wage Increases in 2024

A) White-Collar Jobs

Pay increases in most white-collar roles are expected to slow down in 2024. This deceleration can be attributed to the economic outlook and general business sentiment prevailing in the market. For example, according to the World Economic Forum, most chief economists expect moderately weakened growth in the United States and Europe. Pay freezes – uncommon over the last three years- have become increasingly common as companies face economic headwinds and undertake job cuts. For example, SalesForce, Microsoft, and other leading employers have announced no salary raises for full-time employees in 2023, indicating a shift in the approach adopted by some major organizations.

B) Blue-Collar Jobs

On the other hand, and perhaps due to minimum wage increases in states like California, Washington, and other larger metropolitan areas, blue-collar roles will likely experience continued above-average wage growth in 2024. Beyond increases in the minimum wage, the other drivers for this upward trend are the scarcity of skilled labor and increased demand. Industries such as construction(1), manufacturing, mechanical, supply chain, and transportation, facing workforce shortages, are expected to offer higher wages to attract and retain talent.

c) Overall Projection: Wage and Salary Movement

Based on a review of wage growth, wage/salary movement for 2024 is likely to match or come in only slightly below 2023 levels. Projected pay movements for 2024 are as follows:

4.8% for managers and executives
5.1% for professional administrative positions
5.2% for hourly administrative positions
5.0% for production and blue-collar classifications

D) PROJECTED MERIT INCREASES, BUDGETS: 2024

In setting up budgets, it is essential to understand the difference between overall wage movements and planned increases. Overall wage movements include several personnel decisions impacting an employee's paycheck, including promotions, cost-of-living increases, salary adjustments, adjustments to meet new minimum wage guidelines, and merit-driven increases.

On the other hand, planned increases are the budgeted payroll percent increases set by employers for employee increases. Typically those increases are merit-driven, tied to an employee's performance; however, some companies have plans that call for a flat percent increase for all employees. Generally, depending on industry, and other labor factors, budgeted payroll increases trail overall wage and salary movements by .5% to .75%.

As we look ahead to 2024, a number of publications are forecasting budgets for increases ranging between 4.0% and 4.2%.

Understanding today's market is essential

As employers begin to budget for 2024, organizations must conduct wage benchmarking exercises promptly to assess their position relative to the market. Failure to benchmark wages may result in companies being unaware of potential disparities in market pay. According to the Bureau of Labor Statistics wage and benefits growth tracker, US wages across all jobs have increased by 5.0% as of May 2023. However, it is essential to recognize that specific roles in local markets may have experienced higher growth rates, potentially exceeding the overall average.

To illustrate the impact, let's consider a scenario where the market pay for critical roles has risen 8% in the past year. If a company granted its employees a 4% pay increase, they may unknowingly fall behind the market heading into 2024. To bridge this gap and remain competitive, the organization may consider providing an additional 4-5% increase, considering the observed market pay increases.

Our Software HELPS ORGANIZATIONS Maintain Market Parity

If keeping track of market movement is part of your organization's strategy, our compensation software, BlueComp can help. Developed by Blue Whale Compensation, BlueComp is a game-changing cloud-based compensation management application that stands out from the competition. What sets BlueComp apart is its remarkable ability to offer robust features and functionality as a freeware app. While competitors often charge monthly fees that can reach thousands of dollars, BlueComp provides unparalleled value at no cost. BlueComp is available as a freeware application. Its rich and robust compensation management features are ideal for organizations moving from spreadsheets to cloud-based applications. BlueComp comes with a wide range of features:

Track Market Movements
Easily Compare the Market Value for Different Jobs across multiple locations
Manage Pay Bands by Location
Easily Edit Employee Data
Simple Visual Representation of Salary Structure
Salary Suggestions and Compensation Assistant
Employee-level Suggestions for Reducing Pay Gaps
Market Differences stats to manage costs, address pay gaps, and keep pay in line with the company's compensation philosophy

Maintain Market Standing with BlueComp's Dynamic Market Capabilities

The estimates used by BlueComp to determine annual compensation changes come primarily from the Employment Cost Index (ECI). Published quarterly by the Bureau of Labor Statistics, the ECI is a comprehensive index that tracks wage and employee-related costs across various industries and sectors.

By leveraging ECI data within their BlueComp account, clients can make informed decisions, refine their budgeting, and ensure their compensation strategies remain competitive and responsive to market conditions.

As of 8/1/2023, all BlueComp accounts have been updated with the latest ECI figures. These figures are based on major industry sectors, metro areas, and employment size.

For more information on wage/salary escalation and how to interpret or use your account's information, contact a BlueComp representative today.

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