After dipping in 2020 because of the COVID-19 pandemic, total salary increase budgets in the United States beat projections and rose to 3% in 2021.
This is according to WorldatWork’s “2021-2022 Salary Budget Survey,” which also found that salary increase budgets are projected to grow beyond pre-pandemic levels to 3.3% in 2022. This data signals continued economic recovery and an increasingly tight labor market. Moreover, in 2021, organizations that reported a 0% salary increase budget dropped by half in most employee groups from 2020 levels, which were nearly 10 times higher than in 2019.
The annual survey revealed various compensation insights from organizations across the globe, including that approximately half of organizations in the U.S., Canada, India and the United Kingdom reported negative economic impacts due to the fallout from the global pandemic.
“With differences in how and when organizations and industries recover from the pandemic, and with labor shortages across various industries, we anticipate a great deal of flux in salary budgets over the next few years,” said Sue Holloway, director, executive compensation strategy at WorldatWork.
The survey report was based on 4,085 responses. WorldatWork members were asked to respond for the U.S. and 18 other countries: Australia, Belgium, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Netherlands, Russia, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
Most of the 19 countries covered in the survey reported marginal shifts in salary increase budgets compared to 2020. China saw the greatest swing, dropping from 6.2% to 5.5% in 2021. India had the largest overall increase budget in 2021 (8.7%); Switzerland had the smallest (2.2%).
The survey also revealed that roughly 25% of U.S. and Canadian organizations froze pay in 2021 and around 20% of organizations in India and the UK froze pay.
Additional key findings:
- The pandemic negatively impacted about 30% of organizations’ salary increase budgets in the U.S., Canada, India and the UK; fewer than 10% of organizations expect their salary budget increases to be negatively affected by the pandemic in 2022.
- In the U.S., the pandemic’s impact on salary increase budgets varied significantly across 20 industries. For example, while Mining, Quarrying, and Oil and Gas Extraction led salary increase budgets over several years, it saw a large fall from 3.1% last year to 2.3% this year. Educational Services saw the largest upward shift from 1.5% in 2020 to 2.5% in 2021.
- Most U.S. metro areas reported a slight increase in their averages, with a few drops in cities like Baltimore, Denver and Seattle.
- Consistent with previous years, salary budget increases in the U.S. continue to be greater in smaller organizations.