80% of companies plan to give raises in 2023, according to a new survey (2024)

The Great Resignation is now the Great Regret, and “quiet quitting” has turned into “act your wage” all while companies make employee compensation decisions in an uncertain macroenvironment.

This year, fewer companies plan to give base pay increases, according to Payscale Inc.’s 2023 Compensation Best Practices report released on Wednesday. Eighty percent of companies surveyed said they plan to do so, compared to 92% in 2022. But 15% are unsure whether they will offer raises.

Of those companies that will give a bump to base pay, 56% said it will be over 3%, which is up from 53% of companies who said the same last year. The average increase for 2023 will fall between 4% and 5%. Just 11% of companies (compared to 18% of companies last year) said they’ll increase base pay by more than 5%, according to the report. However, the majority (86%) of companies will give raises out of cycle, due to inflation, the rising cost of living, and preparation for pay transparency.

Another key finding: On average, voluntary turnover has dropped more than 10% (from 36% to 25%). Are employers feeling they have a bit more leverage? Not quite.

“The labor market remains tight, and most organizations are still having trouble retaining talent,” says Amy Stewart, associate director of content and editorial at Payscale. “That being said, some organizations may be more hesitant to hand out raises this year (especially if they already gave hefty increases last year) due to economic uncertainty. Organizations that expect to be impacted by a recession are more likely to be cautious with pay increases, and budgets for pay increases may continue to change as the economy shifts.”

Payscale’s global survey gathered 4,933 responses from employers, including compensation professionals, (69% of the companies are based in the U.S.) across industries from October through December 2022. A total of 66% of companies represented have between 100 and 49,999 employees.

Addressing inflation

The report also puts a spotlight on wage inflation, an issue of importance for employees. Fifty-eight percent of companies said they are addressing the impact of wage inflation by increasing base pay to retain workers, with 40% focusing on the whole workforce, and 18% focusing on lower-wage workers only.

Salaries tend to be determined according to the cost of labor. However, “Cost of living is frequently considered when it comes to annual pay increases,” Stewart says. “Organizations want to retain workers by maintaining the value of their pay as well as reward them on merit.”

The survey found that 41% of companies think they are losing talent due to insufficient pay increases. “This was slightly higher for the finance and insurance industry (43%),” Stewart says. An additional finding is 63% of finance and insurance companies said they have a compensation strategy compared to 55% overall, she says.

Top performers track HR metrics

The report identifies top-performing companies as those that reported exceeding their 2022 revenue goals. The HR metrics top-performing organizations track more than the other companies include high-performer turnover rate, productivity, cost-per-hire, the ratio of HR staff to employees, and the cost of HR per employee.

“Tracking HR metrics increases with the size of the company and the resources they have at their disposal,” Stewart explains. “While there could be many factors as to why the top companies have tracked these specific metrics, it is plausible that the Great Resignation was a driver for organizations that were not tracking metrics previously.”

Some investor groups are pushing companies to report more on HR data in financial accounting to better estimate a company’s value, Peter Cappelli, the George W. Taylor professor of management at the Wharton School,recently told me. “If employees had asset value, one would think twice about just cutting them,” Cappelli said.

Another finding of Payscale’s research is 63% of organizations said pay equity analysis is planned or is a current initiative in 2023. And this is significantly higher than even a few years ago, according to the report.

There are a lot of factors involved in making compensation decisions, but transparency and being aware of the needs of employees seem to go a long way.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

"True Impact of Failed Payments Report," released by LexisNexis Risk Solutions, gauges cross-border payments performance on a global scale. More than 70% of respondents are unsatisfied with their payment failure rate. And 64% said broken or failed payments negatively impact staff workload. Rejected or repaired payments result in a penalty fee. The cost is partially due to higher fees for large companies and the involvement of more expensive banks or more advanced solutions, according to LexisNexis. Respondents named the accuracy of payment details, speed of processing, and little to no manual labor as important factors for payment processing. Problems with bank beneficiary name and address details are the most common source of payment delay or failure. The findings are based on a global survey of 400 payment executives representing corporations and financial institutions.

Going deeper

"Mining Underground Innovation," new research in MIT Sloan Management Review explains what drives research and development (R&D) employees who engage in personal side projects or "underground innovation" that yield new innovations. These projects are often highly aligned with the company's interests, but managers can do more to uncover them and capture their value, according to the research."It is hard to stop innovators from innovating," Jeroen P.J. de Jong, professor atUtrecht University and coauthor of the report, said in a statement. "Underground projects by R&D employees are a valuable source of innovationifthe work can be made visible—but are missed opportunities for the organization if they are not."

Leaderboard

Ryan Clemen was promoted to CFO at SelectQuote, Inc. (NYSE: SLQT), an insurance sales agency. Clement was named interim CFO in May 2022. Before joining SelectQuote in January 2022 as the SVP of financial planning and analysis, Clement served as the CFO of Sifted (formerly VeriShip), a SaaS-based software technology company. Before Sifted, Clemen spent seven years at Edelman Financial Engines, where he served in various senior-level finance and operational roles.

David Rudow was named CFO at Unite Us, a software company enabling cross-sector collaboration. Rudow will lead the Unite Us finance organization. He served most recently as CFO at nCino, a cloud-based software company taking the company public in 2020. For more than 20 years, Rudow served in senior leadership positions, including SVP at CentralSquare Technologies and senior analyst roles for several leading investment banking and asset management firms. He is also a certified public accountant and previously worked at KPMG and PriceWaterhouseCoopers.

Overheard

“These are not skillfully written submissions.Things like ChatGPT simply allow [users] to create a lot of quick, free, and easy content that they’ll have absolutely no hope of selling to us.”

—Neil Clarke, editor of Clarkesworld, a U.S.-based science fiction magazine, told Fortune. Clarke recentlystopped accepting story submissions after receiving an overwhelming number created with or enhanced by generative artificial intelligence technology like ChatGPT.