At the height of the Great Resignation a few years ago, salary increase budgets told the story: Employers were willing to pay a premium to get workers in the door. Today, that urgency has lessened slightly, as organizations navigate a changing job market amid a backdrop of economic uncertainty.

New research out this week from The Conference Board found that—of the 300 compensation leaders the organization surveyed—projected salary increase budgets for 2025 are expected to edge up about 3.9%, a slight increase from the actual 3.8% these organizations reported this year. While the figure is among the highest projections the agency has seen in the last two decades, researchers say, it represents a drop from the actual increases of 4.4% in 2023.

“A shrinking labor supply is driving businesses to focus on retaining their current workforce, leading to sustained salary increases and higher real wage growth as inflation moderates,” says Dana Peterson, chief economist at The Conference Board.

Navigating a ‘balancing act’

While salary increase budgets remain high, movement in the rest of the compensation landscape suggests economic pressures are causing HR and compensation leaders to rethink pay strategies.

For instance, The Conference Board’s U.S. Salary Increase Budgets 2024-25 report found that the uptick in new sign-on and retention bonuses seen over the last few years is slowing. While the majority of those surveyed will continue existing one-time bonuses, the trend is waning: Organizations are more likely to discontinue retention bonuses than start them and also are more likely to suspend sign-on bonuses than initiate such rewards.

Meanwhile, since last year, 14% more companies will look to recognition programs as a retention tool, and 6% more are investing in equity compensation, which can include stock options.

“This indicates a balancing act between salary and wage pressures and performance-based and budget-flexible compensation strategies,” researchers wrote.

Diana Scott, U.S. Human Capital Center leader for The Conference Board, says HR can find that balance by “focusing on non-base-pay and non-cash elements that drive attraction and retention.”

This can include recognition programs, equity grants and workplace flexibility. Scott notes that it’s important for leadership to differentiate rewards—for instance, targeting high-impact employees, those in evolving roles and employees who have exhibited “critical skills.”

“To remain competitive and responsive to market dynamics, employers need to adjust their compensation strategies,” Scott says.