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Salary increases may slow this year, but they’re still expected to remain historically high, survey says
Summary
Pearl Meyer's annual executive pay practices survey found that while two-thirds of companies expect similar year-over-year salary increases, there are signs that wage growth may be slowing. Additionally, 20% of companies are including environmental, social, and governance-related issues as a stand-alone metric in their incentive plans, but only 5% are expecting to add new ESG metrics in 2024. The survey also found that slightly more than 40% of companies are considering changing their short-term incentive plans for senior executives. Median salary increases are expected to be 3.7% for broad-based employees and 3.5% for senior executives, down from 4% expectations from last year. Companies should take data into account when making compensation decisions, but should also base decisions on their talent management strategies and business goals.
Q&As
What percentage of companies responding to Pearl Meyer’s annual executive pay practices survey expect similar year-over-year salary increases?
Roughly two-thirds of companies responding to Pearl Meyer’s annual executive pay practices survey expect similar year-over-year salary increases.
What percentage of companies expect to include environmental, social and governance-related issues as a stand-alone metric in their incentive plans?
Around 20% of companies expect to include environmental, social and governance-related issues as a stand-alone metric in their incentive plans.
How much is the median expected increase for broad-based employees and senior executives?
The median expected increase for broad-based employees is 3.7% and for senior executives is 3.5%.
What is the recommendation from Pearl Meyer for companies basing compensation decisions?
The recommendation from Pearl Meyer for companies basing compensation decisions is to examine the data and understand their position relative to trends, but always base compensation decisions on their talent management strategy and business goals.
What is the focus of ESG initiatives for companies in 2024?
The focus of ESG initiatives for companies in 2024 is looking at key elements of ESG and other nonfinancial metrics that are most relevant to, and hold the most strategic value for, their company and their industry.
AI Comments
👍 This article does a great job of outlining the nuances of executive pay raises and the role of ESG initiatives in modern compensation practices.
👎 This article does not account for the potential overspending that may occur when giving blanket high raises across all positions.
AI Discussion
Me: It's about how salary increases may slow this year but are still expected to remain historically high. It also talks about how companies expect to include ESG-related issues as a metric in their incentive plans.
Friend: Interesting. What are the implications of this?
Me: Well, it looks like companies are still looking to remain competitive in terms of salaries, but they may be lowering their expectations for how high next year's raises will be. Additionally, there's a growing focus on ESG initiatives and other non-financial metrics in executive pay plans. It's important to remember that data should be used as reference points, but compensation decisions should be based on a company's talent management strategy and business goals.
Action items
- Research the current trends in executive pay plans to understand the unique circumstances of your organization.
- Consider adding ESG-related metrics to your incentive plans to remain competitive for talent.
- Analyze the key elements of ESG and other nonfinancial metrics that are most relevant to your company and industry to ensure your compensation decisions are based on your talent management strategy and business goals.
Technical terms
- Salary Increase
- A raise in salary given to an employee.
- ESG-Related Issues
- Environmental, social, and governance-related issues that are taken into consideration when making decisions.
- Incentive Plans
- A plan that rewards employees for meeting certain goals or objectives.
- Human Capital Oversight
- The management of an organization's human resources.
- Metric
- A measure used to evaluate performance.
- Short-Term Incentive Plans
- Plans that reward employees for meeting short-term goals.
- Financial Metrics
- Measures of financial performance.
- Median
- The middle value of a set of numbers.
- ESG Initiatives
- Programs or initiatives that focus on environmental, social, and governance issues.