If you’re aiming for a substantial raise or promotion this year, you might need to lower your expectations. U.S. companies are planning to allocate less towards pay increases and title advancements in 2024 due to a stabilizing job market and cooling inflation, according to new research from Mercer, an HR consulting firm.

Businesses’ total salary budgets, encompassing all pay increases including raises and promotions, will average 3.6% in 2024, down from the 4.1% allocated in 2023, as per Mercer’s report. This analysis, based on data from over 1,000 U.S. organizations across 15 industries, highlights the cautious approach companies are taking towards compensation.

Employers are also scaling back on promotions. In 2023, 10.3% of employees were promoted; in 2024, companies plan to promote only 8% of their workforce. This reduction reflects broader economic uncertainties.

Although Mercer’s report doesn’t detail the reasons for the decline in raises and promotions, “what we’re hearing in conversations with our clients is just generally economic uncertainty,” said Michael Citron, a principal and compensation and rewards consultant at Mercer, to CNBC Make It. This uncertainty has led companies to adopt a more conservative stance on compensation strategies.

Companies Adjust Employee Expectations Post-Great Resignation

Despite the reduction, U.S. employers are still spending more on salary increases than in the past. Raises averaged about 3% annually following the 2008 financial crisis. In 2024, companies plan to give average salary increases of 4%, according to recent research from Willis Towers Watson, another consulting firm.

Compensation budgets are slowly returning to pre-pandemic norms, noted Lauren Mason, Mercer’s U.S. workforce solutions and innovation leader. This shift provides relief from the wage pressures experienced during the “great resignation.” Workers left their jobs in record numbers in 2021 and 2022, attracted by higher pay and numerous job opportunities. Consequently, employers raised wages at unprecedented rates to attract and retain talent.

The stagnation of salaries signifies a necessary reset from the “great resignation” period when hiring managers faced difficulties filling roles, explained Julia Pollak, chief economist at ZipRecruiter. With lingering concerns about a potential recession and reduced competition for talent, companies are now focusing on cost-cutting. Instead of offering raises and promotions, “employers are turning their attention toward other benefits and programs to retain workers,” Pollak added.

Keeping Employees Happy Without Raises or Promotions

According to Mercer’s research, 62% of organizations plan to give employees off-cycle salary increases — additional compensation not tied to annual performance reviews — to help retain talent. This strategy allows companies to address specific retention issues without committing to higher annual salary budgets.

Additionally, companies are enhancing non-monetary rewards and employee benefits to maintain morale and engagement. Popular benefits include student loan assistance, mental health stipends, and professional development programs, Citron mentioned. These offerings provide significant value to employees without the financial burden of widespread raises.

Employers shouldn’t rely solely on pay raises or promotions to motivate employees, Citron emphasized. Investing in training programs and even small perks like flexible hours or additional paid time off can significantly improve job satisfaction and retention. These initiatives foster a supportive work environment that values employee well-being and professional growth.

“There are some years where you’re not going to be able to promote as many people or offer as high wage increases as you want to,” Citron noted. “But what else are you doing to motivate and support employees when those options aren’t possible?” This comprehensive approach to employee satisfaction helps maintain a motivated and loyal workforce, even in economically uncertain times.