904 356-JOBS (5627)

904 356-JOBS (5627)

Pay raises for 2025 aren’t falling in line with projections. Here’s what’s different. (Courtesy of the Jacksonville Business Journal) — Pay raises are so far this year slightly lower than originally projected by employers, the latest evidence of a slowing job market and a turbulent economy.

Companies have so far in 2025 delivered average merit-based pay increases of 3.2%, according to the March 2025 Mercer QuickPulse U.S. Compensation Planning Survey. That’s slightly less than the 3.3% rate employers in late 2024 said they would be increasing merit pay this year.

Total pay, which includes both merit increases and any promotion or cost-of-living pay raises, has grown 3.5% so far in 2025. That’s also less than the 3.7% total-pay increases company leaders were projecting in late 2024.

The actual merit increase last year was 3.3% and the total salary increase was 3.6%, which means 2025 is so far seeing smaller raises overall.

Raises vary by industry, employee performance

Not all jobs are seeing the same rate of pay increases.

The health-care services and retail industries reported lower increases than other sectors, with average merit increases of 2.8% and 3%, and total increases of 2.9% and 3.2%, respectively, so far this year. The insurance and services sectors delivered higher total increases of 3.7% and 3.8%, respectively.

Employees seeking larger pay raises will need to get promoted, according to the survey. This year, surveyed employers said they expect to promote approximately 10% of their workforce — up from 8% in 2024 — with an average pay increase of 8.5% associated with promotions. 

There is also a significant difference in how much merit pay each employee will receive, according to the survey. For the 44% of company leaders who use five performance ratings — the most common approach — top performers are expected to receive an average pay increase of 5.6%, compared to 3.3% for those who fall in the middle.  

Meanwhile, so far in 2025, the average minimum hourly wage paid across all companies surveyed is $17.50 per hour. A previous survey by Mercer found 60% of hourly employees felt they were fairly compensated, compared to 78% of salaried employees.

“To bridge the widening satisfaction gap between hourly and salaried employees, organizations must move beyond minimum-wage increases,” said Lauren Mason, Mercer’s U.S. workforce solutions leader, in a news release. “A comprehensive total rewards strategy that integrates affordable benefits, a positive working environment and clear paths for skills-based career growth is essential. By investing in these areas, organizations can improve hourly employees’ pay progression, financial well-being and overall engagement.”

Employees pessimistic about pay raises in 2025

Separately, 56% of company leaders surveyed by business-advisory firm WTW said their workers were concerned about base pay increases being affected by the recent wave of tariff actions. 

The Trump administration imposed a near global 10% tariff in early April, as well as much higher tariffs on goods from China. Another set of sweeping, so-called retaliatory tariffs set to go into effect last month was delayed for 90 days after financial markets saw massive drops.

But most company leaders were not planning any immediate course corrections when it came to pay raises, according to the WTW survey, with 48% saying there would be no impact on pay raises this year but that next year’s budget may be impacted. Another 28% said there would be no impact at all.

The volatility around tariffs comes as wage growth has remained relatively consistent in the past few months, according to the Federal Reserve Bank of Atlanta, clocking in at 4.3% in March over the same time in 2024 — about the same rate it’s been since November.

That’s come down significantly since the pandemic-era high of 6.7% wage growth in August 2022 but remains higher than the average 3% to 4% wage growth in the year leading up to the pandemic.