2025 Salary Budget Projections Show Moderate Increases with Future Declines Expected

2025 Salary Increase Budgets Projected to Decline Further

In a landscape marked by economic uncertainty, participants in WorldatWork's recent Salary Budget Survey indicate that companies are bracing for tougher times ahead in 2026. This year’s survey demonstrates a noticeable drop in salary increase budgets worldwide, a trend that aligns with earlier predictions made a year ago. The results shed light on how employers are navigating the complexities of compensation amidst ongoing geopolitical tensions and evolving business conditions.

Survey Overview

Conducted as part of WorldatWork's 52nd annual Salary Budget Survey, the findings encompass insights from approximately 17 million employees across 22 different countries. From March to April 2025, the survey engaged 1,774 organizations, yielding over 4,250 unique responses. This comprehensive perspective allows for a panoramic view of compensation strategies across diverse markets, providing valuable data for Total Rewards and HR professionals.

Key Findings

The survey highlights that salary increase budgets in the United States have declined slightly, down from 3.9% in 2024 to 3.7% in 2025, with expectations for further reduction to a projected 3.6% for the following year. U.S. organizations are not only scaling back their projected budgets but also witnessing a consolidation in the range of budget amounts reported. Fewer organizations now anticipate significant budget extremes, signaling a cautious approach to compensation policy.

Meanwhile, Canadian salary budgets have also dipped, averaging 3.4%, which is lower than earlier predictions and reflects a decrease from 2024. Contrary to this trend, India outshines as it continues to present the most substantial salary increase budgets in the survey, averaging 9.0% for 2025, albeit this marks a decrease from last year’s figures and returns to levels not seen since 2016.

The United Kingdom reports similar constraints, with an average budget of 3.8%, down by 0.5% from the previous year. This decline reflects a consistent theme where organizations are exercising caution with budget allocations, influenced by persistent economic challenges and labor market uncertainty.

Equity Remediation

A critical aspect of the survey reveals that many organizations are actively addressing pay equity issues. Throughout the U.S., Canada, the UK, and India, a majority of organizations have implemented pay adjustments to ensure fair compensation among employees. This effort is crucial in fostering an equitable workplace and addressing discrepancies in pay across different employee demographics.

Insights from Industry Experts

The survey results have prompted experts like Liz Supinski and Sue Holloway from WorldatWork to reflect on the implications of these budgetary trends. Supinski notes, “The general theme here is caution. Slowing growth, persistent uncertainty, and rising geopolitical tensions are leaving organizations concerned about the future.” Holloway further emphasizes that the overall contraction of salary budgets suggests a careful strategy by employers as they navigate a complex economic environment.

Conclusion

As companies prepare for 2026, understanding these trends will be essential in shaping their compensation strategies. The continued reliance on data-driven insights is crucial for HR professionals aiming to attract and retain top talent. WorldatWork’s comprehensive survey equips organizations with the knowledge necessary to adapt their Total Rewards programs effectively, ensuring that they remain competitive even in challenging circumstances. Organizations that engage with such data-driven resources can better manage their workforce's expectations and foster a committed work environment in times of economic fluctuation.

In summary, the analysis of the 2025 salary budgets reveals a cautious outlook for the coming year, with implications extending across various sectors and geographic regions. Stakeholders invested in the field of Total Rewards should take heed of these insights as they navigate the intricate dynamics of employee compensation in the future.