Slowdown in employee pay raises forecasted for 2025
Employee pay increases are set to decelerate again in 2025, according to a recent survey conducted by Gartner.
The survey, which polled 300 Chief Financial Officers and finance leaders, indicated a continued trend of slowing pay increases, with only 61% of CFOs planning to raise employee compensation in 2025. This is a decline from 71% who anticipated increases in 2024 and 86% in 2023. The global survey included respondents from various regions: 12% from Asia-Pacific, 24% from Europe, the Middle East, and Africa, 4% from Latin America, and 60% from North America.
Randeep Rathindran, Distinguished Vice President, Research in the Gartner Finance practice, commented on the findings, "The slowdown in pay increases reflects falling rates of inflation and lower levels of voluntary employee attrition. However, even though the labour market is cooling, CFOs must balance the potential risks of attrition and low engagement as employees still face stubbornly high costs for household necessities."
Further insights from the survey revealed a significant reduction in the percentage of CFOs planning substantial pay raises. "There has been a shift toward smaller pay increases," Rathindran noted. "The proportion of CFOs planning to boost average employee compensation by 10% or more fell from 16% in 2023 to 11% in 2025. While 79% of respondents planned increases of 4% to 9% in 2023, only 50% are planning the same in 2025."
Gartner experts suggest that CFOs collaborate with their Chief Human Resources Officers to devise a differentiated compensation strategy. This strategy should ensure that compensation packages for critical talent remain competitive as market conditions change.
"CFOs who are significantly reducing employee wage increases should use leading indicators of employee engagement to fully understand the potential impact on talent attrition," Rathindran advised.
Gartner provides further analysis in its document, "2025 Budget Priorities for CFOs", available to its clients. Non-clients have the option of downloading "The CFO Report" for additional information.
