Tips for 2023 Compensation Planning

Tips for 2023 Compensation Planning

by Becki Leonard, PHR, SHRM-CP, on October 20, 2022
Welcome to Quarter 4, a hectic period of final pushes toward year-end goals and planning for the upcoming year.

As business leaders begin their 2023 compensation planning, they are understandably concerned about inflation, compression and doing more with less overall while desperately trying to retain talent.

According to a recent Mercer US Compensation Planning Survey, the average budgeted merit and total salary increase is rising from 3.8% in 2022 to 4.2% in 2023.

Some tidbits to remember when looking at next year's compensation strategy:
  1. The key problem in 2022 compensation planning was significantly understated budgets due to out-of-cycle compensation increases. Be realistic in your planning for 2023.
  2. Hiring bonuses can effectively attract talent without throwing off internal pay equity. The discussion on whether or not your organization anticipates employing these bonuses needs to happen before budgets are finalized.
  3. Inflation has drastically reduced the quality of living for many. Your hourly workers are the most vulnerable when it comes to inflation. It's okay to look at a higher cost-of-living adjustment for this group of employees for 2023. 
  4. Finally, if you're uncomfortable with how fast and furious the market has driven up compensation, and the long-term sustainability of this for your business, consider adding a one-time bonus to employee compensation packages this year. There's nothing to keep you from making this a longer-term decision, but it also gives you the flexibility to pause and see what the economy is doing without unnecessarily adding to base pay.

Current LandrumHR PEO clients can reach out to their HR Business Partner for more information. Prospective clients are encouraged to contact us to learn more about our suite of HR services.
Becki Leonard, PHR, SHRM-CP

Becki has over 25 years of Human Resources experience and holds a business degree with a concentration in HR. She is certified as a Professional in Human Resources (PHR) by the HR Certification Institute (HRCI) and a Certified Professional through the Society for Human Resource Management (SHRM-CP). She also holds her SHRM People Analytics Specialty Credential. At LandrumHR, Becki has worked with the staffing, PEO, and consulting divisions of the company. She currently holds the position of Managing Consultant for hrQ, their national Human Capital Consulting firm. Becki is passionate about helping organizations best manage their greatest resource – their people. A teacher at heart, Becki focuses on helping business leaders understand the “why” behind the “what” so they can move forward with confidence in their decisions.

View more blogs by Becki Leonard, PHR, SHRM-CP