When Salary Bumps Flatline

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By: Russell Pearlman

For workers expecting some fat raises, the recent year has certainly been disappointing. Gone are the days of 10 percent bumps and 20 percent bonuses; instead, modest salary raises have been the norm. And as we head into 2024, it appears CFOs are only getting started.

According to a Korn Ferry survey, companies around the world plan to raise salaries by an average of 3.8 percent, compared to 4.4 percent in 2023. On an individual basis, raises won’t vary much, either—whether an employee is a midlevel manager, CEO, or anyone else. In nearly every country, expected raises for every employee group in 2024 will be within a half percentage point. 

The news isn’t grim for everyone. As Tom McMullen, leader in Korn Ferry’s North America Total Rewards group, points out, the job market—with many highly skilled employees looking to hop to a new firm for more money, as well as freshly graduated candidates with glowing résumés—is still healthy. “Companies still want the best talent and to protect key roles,” he says.

But belt-tightening is winning the day, because economies worldwide are slowing down—which means fewer people are threatening to quit when they don’t get big pay bumps. Most importantly, inflation, despite slowing, remains a serious company cost that affects salary budgets.

So how do firms keep turnover low? Experts say flexibility in both return-to-office and work hours still tops lists of worker requests. While a majority of CEOs want their workers back in the office, many employees are balking. That flexibility—a necessity during the worst parts of the pandemic—can now become a benefit differentiator.

The other big employee ask: career-development opportunities. That doesn’t mean only getting promoted, either. Indeed, lateral moves across organizations—which offer an employee experience and the opportunity to learn new skills—can be particularly effective. “It needs to be meaningful,” says Maria Amato, a Korn Ferry senior client partner specializing in engagement and retention. Done right, she adds, career development can help deepen an employee’s connection to their work, without the need for employers to hike their pay.

The good news is that these two non-cash approaches have actually worked, as have others, says Anthony Klotz, the originator of the term “Great Resignation” and a professor of management at University College London School of Management. Organizations that have taken steps to be more flexible or add development opportunities have seen their attrition rates drop, he says: “For millions of people, work has gotten better over the last two years.”