Salary Planning Tool for 2025
Most of you are working on your budgets and salary planning for next year so I wanted to share Payscale’s 2024-2025 Salary Report which will be a helpful tool in your planning. The document below will give you critical information that will help you look at national and industry standards for salary planning budgets. We have used Payscale’s compensation database to support our clients with compensation studies for over 5 years. They are a world leader in compensation data analysis.
Remember, even though you may set a 3.5% budget for salary planning increases for 2025, you should follow a pay for performance philosophy for your employees. The budget, if used properly will allow you to give your top talent a 6-8% salary increase, and then your lower performers should be getting a 0-2% increase. By following this plan, you are rewarding your top performing employees to send a strong message to them and ideally, retaining them longer. Conversely, you are sending a strong message to your lower performing employees that they need to step up their game through coaching and performance management, or perhaps, look for employment elsewhere. If you lose a lower performing employee, you will then have the chance to hire a better employee, a great process called top grading.
Pay for performance is not for the faint hearted, but it works very effectively to reward your key employees and send the message to your lower performers that their current performance level is not acceptable. Getting a participation trophy when your kid is 5 years old on the soccer team may be okay even if they don’t win a game, but that doesn’t translate to the business environment. You don’t get a trophy for participation at work, you get rewarded for results.
Train your managers to have conversations regarding pay. It’s easy to talk to your rock star employee and give them an 8% increase, it’s not easy to tell your mediocre employee they are getting a 1% increase. It’s challenging for them, especially newer managers. Equip them to be successful, these are critical conversations that need to be done well.
The last thought here is to consider putting aside a 1% budget for off cycle increases or promotions. If you have an employee who takes on a bigger role or adds significant responsibility to their role, it may not be considered a promotion, but you want to give them an increase outside the normal pay increase cycle. By having your finance team set aside a 1% budget for these types of increases, you won’t have finance telling you we don’t have the budget to do this and you’ll need to wait until 2026. A tip from my many years in Corporate HR roles.
If you need help working through this process or to offer training for your managers on how to have these conversations, please reach out.
2024-2025 Salary Planning Report
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Small and medium-sized businesses may not have the time or expertise to implement the necessary people strategies for business success. The ideas above can be easily implemented by you to help improve the performance of your employees which leads to increased employee engagement and increasing the bottom line.
We are here to help you with the people side of your business: employee engagement, retention programs, performance management, vision, and strategic plans, leadership development, selection & onboarding, compensations programs, organizational design, employee handbooks, core values, and all things HR-related.