By the KMA Team
This report summarizes the findings from KMA’s 2024-25 Salary Increase Survey, which collected data from organizations across New England on recent and projected compensation trends. As inflation cools and the job market rebalances, salary increases for both Cost of Living Adjustments (COLA) and Merit are trending downward from their 2023 highs. After navigating through high inflation and a tight labor market, organizations are adopting a more moderated approach to compensation.
Our findings line up with a recent Mercer article projecting total salary increase budgets for 2025.
2024 Data Highlights
Market Adjustments:
- 40% of organizations implemented market adjustments in 2024.
- Key drivers included:
- Increasing pay for new hires, necessitating adjustments for existing staff.
- Market data reviews indicating higher pay levels.
- Targeted increases for in-demand and difficult-to-fill positions.
- Adjusted salary bands.
COLA and Merit Trends
Planned vs. Actual Increases in 2024:
Planned: 3% for both COLA and Merit
Actual: COLA at 3.2%, Merit at 3.3%
2025 Projections
- Increase Types:
- 57% of organizations plan to provide either COLA or Merit (not both).
- 38% plan to offer multiple types of increases (e.g., COLA, Merit, market adjustments).
- Projected Increases:
- COLA: Projected increase of 2.9%.
- Merit: Projected increase of 3.5%.
- Market adjustments and promotions: Average increase of 2.8%.
- Key Trends:
- Shift towards prioritizing Merit increases as inflation cools.
- Projected increases align closer to historical averages (3%) observed pre-pandemic.
Broader Economic Context (BLS Data)
- Consumer Price Index (CPI): Increased by 2.7% for the 12 months ending November 2024.
- Social Security COLA Increase: 2.5% for 2025.
- Employment Cost Index: Compensation costs rose 3.9% for the 12 months ending September 2024.
Overall Observations
- The employment market is stabilizing after years of volatility.
- Inflation has decreased, influencing the downward trend in COLA increases.
- Organizations are shifting focus to Merit-based increases, moving away from inflation-driven COLA adjustments seen during higher inflation periods.
- Salary increases are aligning with pre-pandemic norms of approximately 3%, reflecting a rebalancing of market conditions.
As always, reach out to the experts at KMA for guidance on your compensation strategies and planning.
Download Report
