Companies around the world are experiencing lower employee voluntary turnover and planning for salary increase budgets in 2025. Headcount will also remain stable, with normal hiring expectations, according to the second edition of Aon’s Salary Increase and Turnover Study. The study was conducted in June and July 2024 and contains 2,186 participants across all industries and 115 countries.
Compared to last year’s data, there has been noticeable decline in turnover and recruitment activities. The projected figures for salary increase budgets in 2025 closely match the 2024 figures and do not show upward movement. This trend reflects a complex and evolving landscape in response to economic uncertainty and a moderating labor market. However, there are still selective layoffs and headcount adjustment in certain sectors.
“We're seeing a continued shift away from rapid recruitment to a more controlled pace,” notes Julie Mills, an associate partner in Aon’s talent practice who leads the study. “Organizations are still working to understand the conflicting economic indicators. Currently, the approach for hiring and salary budgeting remains cautious.”
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Inflation continues to be a concern for businesses across the globe, affecting budget decisions for salary increases and overall compensation strategies. Although inflation rates have declined in many regions, they still pose challenges for multinational corporations, particularly those with employees in high-inflation areas like parts of Latin America.
Linking salary increases to the inflation rate can lead to systemic issues, such as overcompensating or undercompensating employees in different regions. This can then create pay disparities within the organization, necessitating mechanisms to review and potentially reverse salary adjustments when economic conditions stabilize. Additionally, many factors contributing to the recent high levels of inflation are cyclical. Adjusting salary increases as a short-term measure may not align with the longer-term costs of various goods and services.
“Inflation challenges in other countries significantly impact multinational companies. These organizations must remain cognizant of global economic conditions and integrate these complexities into their strategies," says Christine Gnutek, an associate partner in Aon’s Talent Solutions practice in North America. “The challenge lies in developing a systemic approach that aligns with compensation governance.”
Even with inflation declining, many employees are still experiencing its effects. Other elements of total rewards are therefore crucial for employers to emphasize to keep employees satisfied.
With no clear picture of economic rebound on the horizon and ongoing pressure to control costs, employers are responding conservatively by tethering 2025 global salary budgets very closely to 2024 numbers.
of companies across the U.S. and UK report normal hiring activity compared to 48 percent in the U.S. and 46 percent in the UK last year.
Source: Aon Salary Increase and Turnover Study Second Edition, 2023, 2024
| 2025 Projected Budget | Actual 2024 Budget | |
|---|---|---|
| Asia-Pacific | ||
| Australia | 4.0% | 3.9% |
| China | 5.5% | 5.2% |
| India | 10.1% | 9.5% |
| Singapore | 4.1% | 4.0% |
| Europe, Middle East and Africa | ||
| Denmark | 3.8% | 3.5% |
| France | 4.0% | 3.8% |
| Germany | 4.0% | 4.0% |
| Israel | 3.3% | 4.0% |
| Italy | 3.8% | 3.6% |
| Spain | 4.0% | 3.9% |
| South Africa | 6.0% | 5.8% |
| United Arab Emirates | 3.8% | 4.0% |
| United Kingdom | 4.0% | 6.5% |
| Americas | ||
| Brazil | 5.1% | 5.0% |
| Canada | 4.0% | 3.9% |
| Mexico | 5.5% | 5.3% |
| United States | 4.0% | 4.0% |
Source: Aon Salary Increase and Turnover Study Second Edition, 2024
Our survey data also indicates that over 90 percent of employers do not have a separate merit budget for high potential, top performers and critical talent. Employers must focus their efforts to find effective strategies for recognizing outstanding employees and consider all total reward options to attract and retain talent efficiently and cost-effectively.
As hiring activity stabilizes, voluntary turnover is falling. Given concerns about the economy, lingering layoffs and a slower hiring market, employees globally are opting to remain in their current positions.
| 2024 | 2023 | |
|---|---|---|
| Asia-Pacific | ||
| Australia | 10.7% | 13.3% |
| China | 5.8% | 8.0% |
| India | 10.6% | 13.7% |
| Singapore | 9.8% | 13.1% |
| Europe, Middle East and Africa | ||
| Denmark | 8.6% | 9.0% |
| France | 6.9% | 7.2% |
| Germany | 6.6% | 7.7% |
| Israel | 6.3% | 7.4% |
| Italy | 5.9% | 6.8% |
| Spain | 4.9% | 6.9% |
| South Africa | 10.7% | 10.5% |
| United Arab Emirates | 7.4% | 7.4% |
| United Kingdom | 9.4% | 12.0% |
| Americas | ||
| Brazil | 6.9% | 7.5% |
| Canada | 7.9% | 10.1% |
| Mexico | 10.3% | 11.5% |
| United States | 10.1% | 12.6% |
Source: Aon Salary Increase and Turnover Study Second Edition, 2023, 2024
In the present economic situation where salary increase budgets remain largely unchanged, it is important for employers to devise effective methods to reward top performers and retain valuable talent. Here are different levers employers can fine-tune to help:
While compensation is important, other factors like recognition programs are crucial for retention. The most effective recognition programs are ones that align with a firm’s values and culture. These programs usually include a financial aspect and play a significant role in offering a robust employee value proposition.
In today’s dynamic work environment, it’s essential to consider employees’ preferred working styles (where feasible) while aligning with the company’s culture and values. By identifying areas where flexibility can be implemented, organizations can create a working policy that stands out — especially as more companies announce a full or partial return to the office. This might involve hybrid or remote working models, flexible start and finish times or job sharing.
Organizations should approach wellbeing as an integral part of their people and performance strategy; not merely a collection of various programs or tools. Essential elements for effective wellbeing programs include a well-formulated strategy, strong leadership support, a shift in mindset and clear measurement criteria.
Artificial intelligence (AI) will significantly disrupt the workforce. Exactly how and how much, however, is still undetermined. Aon’s global workforce data finds that 21 to 32 percent of roles in select industries may be impacted by AI. This disruption highlights the need for effective workforce planning. Sabiha Vorajee, a director in Aon’s Talent Solutions practice in the UK, notes that while many may view AI positively, others remain more cautious. “The challenge lies in leveraging AI in a manner that mitigates fear and promotes active employee engagement. Organizations must focus on skills adaptation and upskilling to align employees with new technologies and minimize resistance.”
By implementing tailored benefit strategies, companies can create a more inclusive and supportive work environment that caters to the diverse needs of their multigenerational workforce. Examples include menopause support for older women, financial education tailored to different career stages, and assistance with family building, such as fertility treatments and adoption assistance.
Pay equity and pay transparency laws are being implemented across the globe. One of the most notable is the European Union’s Pay Transparency Directive, which goes into effect across EU countries on June 7, 2026. It requires companies to reduce pay inequities to below 5 percent (among other requirements). This directive emphasizes the importance of proactive measures to ensure pay and benefit equity and compliance. As employers consider their salary increase and merit budgets for 2025, here are four tips to keep in mind from a compliance and pay transparency standpoint:
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