For the third year in a row, median raises are sticking high at 4%.  

That’s what Salary.com found in its Annual National Salary Budget Survey. That 4% number is also blanket across the employment spectrum, from hourly employees through executives.  

David Turetsky, vice president of compensation consulting at Salary.com was surprised raises have stayed at 4%, especially for a third consecutive year. “Typically after you get a big year, it will retract a little,” he said. Not so for 2023 — or possibly beyond.

Why 4% is sticking

Median salary ranges have stayed high because the worker shortage brought on by the pandemic hasn’t completely gone away. “I don’t think we’ve left the world of competitiveness in the war for talent,” he said. That’s true even as unemployment rose to 3.8% in September, where it was down to 3.4% in January and April this year.

“It’s still a little bit hard to find people to fill open positions, so in order to maintain that right balance of talent retention, as well as making sure you’re not pricing yourself out of the market in different ways, companies need to increase their compensation budgets,” he said.  

Lori Wisper, managing director at Willis Towers Watson, said that raises, with the exception of a severe downturn like the Great Recession, are also slower to change in tune with current economic conditions. “They’re not as elastic so they don’t go up and down as much,” she said, which means higher raise rates may stick around.

What to know for compensation planning

Of course, 4% is a median number, and not all raise rates will be the same for all jobs in all locations. It depends on the company, and what kinds of workers are hardest to find.

“If the supply and demand of labor in the markets in which they compete for talent says you need to raise pay by 4% and they’re only raising it by 2%, they’re likely to lose people,” Wisper said.  

However, giving blanket high raise rates to everyone, especially for companies with a lot of people in different locations, is a recipe for overspending, and future layoffs, Wisper added, which she said was a factor in batches of tech layoffs earlier this year.

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