Employers under pressure to raise pay despite budget constraints

BY Dexter Tilo ||| 10 Jun 2025 

Organisations delaying pay rises are reporting higher turnover and disengagement in their workforce, according to new research.

The latest findings from Robert Walters revealed the consequences of pushing back salary hikes for professionals and white-collar workers, even if it stems from difficult financial positions.

It found that 49% of organisations that delayed pay hikes reported an increase in employee turnover. Another 36% said delaying pay rises led to disengagement within their teams.

"Our research shows that these decisions, while understandable, are not without consequence," said Sean Puddle, Managing Director at Robert Walters North America, in a statement. "Whether it's higher turnover or a gradual drop in motivation, companies are starting to feel the effects."

The report further found that 57% of employees who didn't receive a pay rise this year are now actively looking for a new job. This is also the case for 65% of employees who received a lower-than-expected pay hike.

"There's a clear message here: even if employees understand the business pressures, unmet expectations are still pushing them to reconsider their options. And with AI tools streamlining the job application process, employees have more opportunities than ever to explore new roles," Puddle said.

Difficult financial positions

The pressure to meet employees' salary demands comes in the wake of financial challenges facing organisations.

"Businesses are under immense pressure to keep costs down, and for many, salary increases just haven't been feasible this year," Puddle said.

According to the report, 53% of business leaders said budget constraints and business performance were the reasons why they delayed or reduced employees' pay rises.

Puddle said they are also seeing more employers who are asking how to retain their best people when pay increases aren't on the table.

Robert Walters' advice: think creatively, such as by offering meaningful career development, flexible work arrangements, as well as internal mobility pathways.

"When salaries are constrained, culture and communication matter more than ever. The organisations that succeed will be those that balance cost control with a thoughtful, market-informed approach to employee engagement," Puddle said.

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Source: HRD

https://www.hcamag.com/us/news/general/delayed-pay-rises-fuels-employee-turnover-disengagement-report/538636