Compensation in 2025: Insights From Our Salary Increase Survey

What does the future of compensation look like? To find out, we surveyed almost 300 employers across three European markets to get their outlook on the next year in compensation. In particular, we wanted to shed light on how companies are defining their salary increase budgets in 2025 (and how that compares to previous years). Read on for our key findings. 

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About our survey data 

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Our salary increase survey was conducted in October 2024 and involved participants from 298 companies, representing a total of 521,469 employees. Participants were located in three countries: France, Germany and the UK. The majority of respondents were Heads of People, Heads of HR, Chief People Officers or Chief HR Officers, though they also included participants from compensation and benefits, finance and talent acquisition teams. Almost half (48.7%) of the employers surveyed were tech companies. 

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5 key takeaways from our salary increase survey 

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Let’s get into it — here are five key insights garnered from our 2024–25 salary increase survey.

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1. Most companies will run a compensation review by mid-2025

Over 90% of the employers we surveyed were already certain that they would run a compensation review over the next nine months. Since we conducted our survey in October 2024, that means that most reviews will take place before July 2025. 

Of those respondents who planned to run a review, 14% had already defined and validated their salary increase budget, while 34% were still discussing the details with finance. 

However, over half of our respondents had no concrete idea of their budget at all. If that’s your situation, don’t worry: we’ve put together this article to share key trends and insights so you can ensure your salary increases are in line with the market. 

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2. Salary increase budgets will decrease slightly in 2025

According to our survey, the average budget for salary increases will decrease slightly to 4.5% in 2025, down from 4.8% in 2024. This is in line with a longer-term trend that saw the average budget drop from over 6% in 2023 to less than 5% in 2024. 

There are likely many reasons behind this shift. However, one idea is that it represents a return to the norm after a strange few years. The COVID-19 pandemic and other factors led to a surge in inflation and a tough labour market throughout 2020–22, and many employers reacted by bumping up their salary increase budgets. The current figure is more in line with what we were used to prior to 2020. 

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3. Once a year is still the most common review frequency 

Around three-quarters (74.5%) of the companies we surveyed run compensation reviews once a year. This has long been the norm, and for good reason: conducting regular reviews is crucial to remain competitive and reactive to the market. But, since they’re also a lot of work, running them more than once a year isn’t possible for many employers. 

That said, our survey does show that a significant 21% of companies are now conducting reviews twice a year, which is an increase of five percentage points from last year. While not all companies need to run reviews this often, doing so can be beneficial for those in fast-moving markets. Biannual reviews also enable employers to quickly correct inequities (and decrease pay gaps) and reward employees more frequently for top performance.

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4. Most companies don’t factor in location when awarding increases

Our survey included participants from three countries: France, Germany and the UK. Surprisingly, we found very little difference between the average salary increase budget in each country. In 2024, the average budget was 4.6% of total payroll in France, 5% in Germany and 5.1% in the UK. 

We also found that only about a quarter (28%) of the companies we surveyed differentiated took employees’ location into account when determining their salary increase budget and processes. 

Of course, this doesn’t mean that actual salaries are the same across different locations, but that location isn’t considered when awarding increases. This suggests that most companies are focused on internal equity and ensuring that raises are fair across the board. 

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5. Almost 50% of companies use categorised budgets

Our survey also found that a growing number of employers (44%) divide their salary increase budget into different categories, earmarking a certain portion for merit increases, promotions, market adjustments and more. 

The number of companies taking this into account has increased compared to last year, suggesting that more and more employers are taking a strategic approach to awarding salary increases. We’ll talk a bit more about the different categories below. 

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Understanding different budget categories

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Employers take into account various different criteria when determining their salary increase budget. Here are some of the different categories we explored in our survey.

General increase

This is a flat percentage-based increase given to either all employees or certain populations within an organisation. It’s not linked to performance or other individual factors. The average budget dedicated to general increases among our survey respondents is 2.5%. 

There are a few different ways that companies can choose to award general increases. For 75% of our survey respondents, employees are eligible only if they have been employed at the company for a certain period, such as nine months or a year. In other companies, eligibility depends on the employee's pay level (8.3%) or their tenure in their current role (also 8.3%). 

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Performance/merit 

Merit increases are pay rises specifically tied to each employee’s performance. According to our survey, 82% of employers dedicate a portion of their budget to performance-based increases — an increase of 11 percentage points on last year. 

However, 18% of companies report that they still give increases to employees identified as low performers. That’s probably due to insufficient performance management and assessment systems, which can make companies wary of using performance to justify pay decisions. 

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Promotions

A promotion is when an employee moves into another job or level that comes with a salary increase. In 2025, 63% of our survey respondents say they have a dedicated budget for promotions, compared to just 46% in 2024. 

Separating this budget is a good strategy for companies where promotions are frequent because it means you don’t use all of your budget to reward promoted employees. After all, those employees who don’t get promoted may still be solid performers. Keeping your promotion budget separate enables you to reward everyone. 

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Market adjustments 

Over the past few years, the job market has been very volatile, with salaries changing extremely quickly for certain roles. This means that bringing employees’ salaries in line with what other companies are paying is crucial if you want to retain talent.

For this reason, more and more companies are dedicating a specific portion of their salary increase budget to realigning salaries with the market each review cycle. In 2025, this is the case for 39% of employers. While this is still a minority, it’s an increase of 12 percentage points on 2024.

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Gender pay gap adjustments

The gender pay gap is a key issue for many employers in 2025. While only 23% of companies currently have a specific budget dedicated to closing pay gaps, this is increasing every year. And, with new pay transparency legislation on the not-so-distant horizon, it’s something we’ll likely see increase over the next few years. 

Having a dedicated gender pay gap adjustment budget makes it easier to correct any pay disparities within your organisation. It also demonstrates a commitment to fair and equitable compensation — which is key to attracting and retaining today’s employees. 

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HR’s role in the compensation review process

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According to our survey, 73% of companies provide managers with specific recommendations to help them award increases to their teams. Depending on the company’s culture, compensation philosophy and policies, this might mean: 

• Giving them a possible range of increases to award (e.g. between 4 and 5%) based on various criteria (merit, market adjustments, etc) 
• Giving them precise percentage increases for each criteria

According to our survey, 52.3% of companies that provide manager recommendations take the first approach and provide only a range of possible increases, while 36.8% give specific percentages. 

But what about those 27% of companies that don’t give their managers any specific guidance on salary increases? In these organisations, decisions about pay are largely left to individual managers — which will be a big problem in the pay transparency era. 

That’s because, once the EU pay transparency directive comes into effect, employers will need to be ready to justify that compensation decisions are made according to objective and gender-neutral criteria. When managers make each decision arbitrarily, this just isn’t possible. 

In the future, HR and compensation teams will play a key role in awarding salary reviews. Ensuring managers understand how compensation works in your organisation will be key to compliance with new legislation.

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Learn more 

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Effective compensation planning requires accurate, real-time data — and that’s where Figures comes in. Our salary benchmarking tool gives you access to the market data you need to ensure compensation is fair and competitive in your organisation. 

Plus, you can now use Figures to streamline the compensation review process, with easy collaboration, actionable, data-driven recommendations and powerful budget monitoring tools. Want to see Figures in action? Sign up for a demo to find out more. 

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