Amid a tight labor market and the persistent pinch of inflation, employers are gearing up to offer pay raises in 2025.
According to the latest Salary Budget Planning Report by WTW, a global advisory, broking and solutions company, overall salary budget increases are expected to hover around 3.9% in 2025. Similar insights from consulting firm World at Work indicate that businesses are projecting an average salary increase of 3.8% in 2025. A PayScale survey provides a slightly more pessimistic outlook, forecasting an average pay increase of just 3.5% in the coming year.
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Is a 3.9% Salary Budget Increase Enough in 2025?
Is an approximate 3.9% pay bump enough to sustain workers in this economy? Here’s what the experts have to say.
“When considering the impact of inflation over the past few years and the economic uncertainty that the upcoming presidential election is and will be bringing to the economy, 3.9% certainly doesn’t feel like enough,” said Lauren Winans, chief executive officer and principal HR Consultant at Next Level Benefits, in an email.
“However, we have to remember that this lopsided balance of annual pay increases when compared to the increased cost of living across the U.S. has been the norm for decades, so the survey results are not surprising by any means,” she said.
In other words, while 2025’s projected salary increases might seem modest given the economic climate, they are not out of line with historical trends in which wage increases tend to lag behind inflation and the rising cost of living.
Brian Pulliam, founder of Refactor Coaching, a career coaching firm specializing in the tech industry, offers a different perspective. “The real question we should be asking is whether people are earning a living wage. Many job disciplines require far more than a 3.9% increase to reach a livable wage, while some job disciplines (many in the tech industry) have already far surpassed the livable wage,” he said in an email.
Ultimately, whether a 3.9% salary budget increase is sufficient depends on individual circumstances, industry norms and economics. At the very least, salary budget increases should keep pace with inflation so workers don’t lose purchasing power. While the Organization for Economic Cooperation and Development sees U.S. inflation dropping to 2.2% in 2025, the exact trajectory remains uncertain.
[Related:What Is the ‘Act Your Wage’ Trend in the Workplace?]
How to Position Yourself for a Salary Increase in 2025
Relying solely on annual salary budget increases is a passive approach to your career and financial growth. Instead of letting the market determine your wages, take control of your earning potential by positioning yourself for pay bumps.
Upskilling and Reskilling
The job market is constantly changing, so make upskilling or reskilling a priority in 2025. “Whether it’s an advanced degree, a new certification or just keeping up with the latest in your field, this investment in yourself can make a real difference when it’s time to talk salary,” said Geoffrey Scott, career coach and senior hiring manager at Resume Genius, in an email.
Before signing up for courses, conduct a skills gap analysis. For example, if you’re a senior marketing specialist, a skills gap analysis might reveal that while you excel in traditional marketing methods, you lack expertise in data analytics tools and digital marketing platforms. Recognizing this gap, you could enroll in courses or certificate programs focused on data analysis, SEO optimization and social media marketing to make yourself more competitive in the job market.
Keep a Record of Your Wins
Documenting your achievements can help you provide a tangible representation of your contributions and the value you bring to your role when it’s time to negotiate your salary. “Don’t be shy about singing your own praises. You’ve got to be your own advocate if you want employers to fully buy into your worth as an individual contributor or leader,” Scott said.
Consider keeping a daily, weekly or monthly journal of your accomplishments on a platform like Evernote or organize them in a spreadsheet.
Understand Your Company’s Compensation Structure
It’s important to get a clear picture of how your company structures salary increases and other compensation opportunities.
“For example, if your company offers a pay-for-performance or short-term incentive program, make sure you have a solid understanding of how it works and what gives you the greatest opportunity to maximize your payout,” said Kevin Talbot, national managing director of compensation and rewards consulting at Arthur J. Gallagher & Co., in an email.
Look for Better Opportunities
According to a recent study by payroll firm ADP, workers who stayed in the same job reported a 4.8% year-over-year pay increase, whereas pay growth for job-hoppers was 7.2%.
“Think of it like this: When you stay at a company, you effectively have a ‘fixed rate salary’ plus a nominal increase each year,” Pulliam said. “So, when you see salary rates increasing at other companies, you can refinance your way into a higher fixed rate salary by moving companies.”
However, while job hopping can be lucrative, it can also be risky and set off alarm bells for future hiring managers.
Be the Best Employee You Can Be
In the end, being an employee that your company truly values and with whom people enjoy working can make a big difference when it comes to salary increases. “Being liked can’t keep your job, per se, but if you are a likable hard worker who always goes the extra mile and stays away and out of drama, chances are you are setting yourself up for long-term success,” said Jennifer Preston, senior HR consultant for Flex HR, in an email. Simply put, being a dependable and positive team player often leads to better opportunities and recognition.
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How to Ask for a Salary Increase
With inflation eating up salary gains, knowing how to advocate for a raise can go a long way to ensuring that your wages align with your contributions. Here’s how to ask for the compensation you deserve.
— Choose the right time to ask. Generally, the best times to ask for a raise are during quarterly and annual performance reviews or at the end of the year. If you’re new at the company, you’ll want to wait at least six months so you have time to prove your worth. Avoid approaching your manager when they’re overwhelmed with work or when the company is navigating financial challenges.
— Research your market value. To determine your value in the job market, consider your education, years of experience and any sought-after skills you bring to the role. Then, use salary comparison sites such as Glassdoor or PayScale to see what others with similar credentials are earning.
— Prove you deserve the raise. Before meeting with your manager, compile a comprehensive list of your achievements since your last performance review, quantifying your impact wherever possible. For example: “I exceeded my individual sales targets by 40% in Q4, resulting in $500,000 additional revenue for the company.”
— Set up a meeting. Asking for a raise via email lacks a personal touch and can lead to misunderstandings. Instead, schedule a meeting with your manager in person or via video call, and let them know in advance that you plan to discuss compensation.
— Express appreciation. Regardless of how the conversation goes, end it by expressing gratitude and thanking your manager for considering your request. If you’re sending a thank-you email, keep it concise — ideally, less than three to four sentences.
Take Control of Your Career Trajectory
While many U.S. employers plan to increase salaries by around 3.9% in 2025, that doesn’t mean you should passively wait for changes to unfold. “Companies are not people. They aren’t going out of their way to ruin your life, but they aren’t exactly going out of their way to help you, either. So, invest in your own career growth,” Pulliam said.
You can take control of your career trajectory by learning new skills and advocating for what you’re worth. This way, you’ll stay competitive in the evolving job market and ensure your salary aligns with what you bring to the table.
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How Much Will Salaries Increase in 2025? originally appeared on usnews.com
Update 08/13/24: This story was previously published at an earlier date and has been updated with new information.
