Annual raises can be an important piece of the retention puzzle, but new research from BambooHR shows that raises are happening less often and, when they do happen, they’re a quarter smaller. In a world where the cost of living is continuing to rise, that’s a problem.

The current economic market is tricky to navigate, forcing employers to pinch pennies in an attempt to keep businesses afloat. But with a lack of qualified talent, retaining employees is also a primary focus – and many employers don’t have the resources to provide the competitive perks top talent craves.

The result is infrequent raises that aren’t keeping up with the cost of living and inflation, among other compensation trends, leading to problems for employees and employers. Here’s what you need to know.

New year, lower raises

According to BambooHR’s study, two in five (41%) salaried employees did not receive raises this past year, compared to 33% in 2022. What’s more, those raises were 25% smaller, going from a 6.2% average increase in 2022 to 4.6% this year.

Looking ahead, nearly a third (29%) of employees don’t expect a salary increase or promotion in the next 12 months.

Beyond raises, the compensation outlook for 2024 reflects the economic challenges of recent years, including continuing fears about job security and the cost of living crisis.

A whopping 73% of employees said they would consider leaving their current job for a higher paycheck, and 48% have thought about doing so in the last six months. And the pay increase that they’re willing to jump ship for – 13.3% – is less than last year, at 16.1%.

The research also found that employees are willing to stick it out for the right reasons:

• 44% would stick with a job they disliked if the salary was high enough
• 24% say they’d be willing to take a salary cut if it meant job security for the next year, and
• 28% would be willing to take a salary cut for a more flexible working location.

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