Actual merit and total increases

A notable 93% of employers in the US either have implemented or plan to implement increases in merit or annual pay in 2025, with most reporting that their budget allocated for these increases is comparable to that of 2024. The survey indicates that the actual mean merit increase nationally, including zero increases, stands at 3.2%, while the total increase, also including zero increases, averages 3.5%. Banking/Financial Services and Insurance/Reinsurance straddle the national average for merit at 3.1% and 3.3%, respectively.

However, certain sectors varied from the national average even more dramatically. For instance, the healthcare services and mining and metals industries reported a mean merit increase of only 2.8%. Also falling below the average is the mean merit increase in the high-tech sector, at 3.1%.

As for total increases in compensation, Insurance/Re-insurance was above the national average with total increases at 3.7%, while Banking/Financial services delivered less, at 3.4%. Interestingly, the Services (non–financial) sector, whose merit increases were below average, reported a mean total increase of 3.8%, indicating a potential strategy that involves making adjustments outside of merit increases.

Promotions and Off-Cycle Increases

Employers expect to promote approximately 10% of their workforce in 2025. In comparison, in March 2024, employers expected to promote an average of 8% of their workforce. The expected average increase in pay associated with a one-level promotion is 8.5%.

In terms of off-cycle pay increases, just over 60% of the survey respondents indicated that employers have either provided or plan to provide off-cycle adjustments in 2025. The primary reasons cited for these off-cycle increases include promotions, retention concerns, and necessary market adjustments. Typically, these increases are funded through the employer’s budget at the business unit or departmental level.

Nationally, the average percent of the salary budget used for promotional increases is 1.0%. However, Banking/Financial Services indicates that they have a higher promotional increase budget for 2025, at 1.3%. Insurance/Reinsurance is below the national average at 0.9%.

Pay Transparency Initiatives

Given that 56% of respondents’ companies operate in countries outside the US, the survey included questions regarding global pay transparency strategies. Only 20% of respondents confirmed that their employers have developed and implemented a global pay transparency strategy, while the remaining 80% reported that they are still in the process of developing or implementing such strategies. Notably, 18% of respondents indicated they do not plan to address pay transparency in the coming year.

One of the significant obstacles to implementing a global pay transparency strategy, as reported by more than 50% of the respondents, is the challenge of understanding global legislation.

Remote working and compensation

Just under 70% of respondents reported that their employers now have a hybrid work model with local office focus and allowing flexibility between remote and office environments. Slightly more than 20% of employers remain primarily office-based.

For those employers that are allowing full-time remote work, 25% are paying employees based on the market rate of the primary office location. Approximately 40% of employers are paying at the market rate of the employee’s home location, and 16% pay using national rates.

Looking for more information?

If you are interested in further exploring topics such as pay transparency, you can participate in the next Mercer QuickPulse® survey. We’d love to help you analyze your current compensation strategy to identify areas for optimization. Give us a call at 855-286-5302 or email us at surveys@mercer.com.