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• The traditional 3% raise has been replaced by a median raise of 4% across all employee categories, and a quarter of employers plan to give increases in the range of 5%–7% in 2023.
• Rising inflation and a competitive job market are driving the trend of higher salaries in the Middle East.
• Employers are also looking to enhance their health and benefits offerings to attract and retain talent.
• Pay transparency laws are becoming increasingly important, with employers being forced to be more transparent about pay.
• This trend is a great opportunity for employees to negotiate for better compensation packages.
• 2023 is a great time for job seekers in the Middle East as employers are willing to offer more competitive compensation packages to attract top talent.

Compensation is always an important part of the employer arsenal, but in 2023, that might be more true than ever. Fueled by a confluence of factors—rising inflation and changing employee expectations among them—HR leaders are planning to turn to larger-than-usual salary increases in 2023, data indicates.

A report from Salary.com, which surveyed 1,000 HR professionals, finds that nearly half of U.S. employers plan higher year-over-year budget increases next year compared to 2022. The long-predominant 3% raise, which started its decline last year, has been replaced by a median raise of 4% across all employee categories, the survey finds. And a quarter of employers plan to give increases in the range of 5%–7% in 2023.

“2023 promises to be another banner year for employees seeking salary increases,” says Chris Fusco, senior vice president of compensation at Salary.com. That’s a far cry from just a couple of years ago. When the pandemic began in 2020, Fusco adds, just under 10% of employers planned a higher salary budget increase than in the prior year.

Other reports are finding similar results: New Willis Towers Watson data finds that salary boosts are forecast to be 4.6% in 2023, up from a mid-year estimate of 4.1%. And compensation consultancy Pearl Meyer data finds that 40% of business and HR leaders expect to provide higher salary increases next year than in 2022.

Compensation Packages

Rising inflation—and talent wars—are driving the trend of higher salaries. Not one but two factors are helping to fuel higher salaries in 2023. Inflation has soared over the past year, causing employees to shell out more for their groceries, gas, housing, medical costs and more. Although inflation has fallen a bit in the last month from 40-year-highs (inflation jumped 7.7% in October versus a year ago, according to the latest cost-of-living index), costs are still hitting workers hard and resulting in a dive in their financial confidence. With employees struggling, many employers are responding. Gartner, for instance, found that 63% of executives plan to make compensation adjustments in response to high inflation.

Plus, a competitive job market is making it all the more imperative for employers to rethink salaries, as well as benefits, to not only entice workers to join their ranks, but sway them to stay, experts say. A survey from human resources consulting firm Mercer finds that more than two-thirds of U.S. employers say they are looking to enhance their health and benefits offerings next year in order to attract and retain talent. Better healthcare access, more affordable medical care and increased family-friendly benefits are all on tap, Mercer found.

One of the ways employers are responding to the need to attract and retain talent is by offering more transparency around pay. Pay transparency laws are taking effect throughout the country—from New York City to Colorado and, starting Jan. 1, California. It’s a big shift that has big implications for employers in those areas—and elsewhere.

One thing HR leaders should keep in mind about the new rules? Posting broad salary ranges in response to the law rather than good faith estimates—say, a salary range that is $75,000-$250,000—is likely going to hurt employers by not only opening an employer up to city or state penalties, but also by deterring potential candidates. “This is forcing organizations to put out one of the things that really builds trust, and that’s transparency around pay,” says Tony Guadagni, senior principal in the Gartner HR practice