Why Do You Need to Consider Your 2023 Salary Budget?
Inflation rates are rising and according to the Consumer Price Index (CPI), all items increased 8.5% for the 12-month period ending in July 2022, which is a near 40-year high. Therefore, all organizations need to adequately prepare for and factor in salary budget increases in 2023 in order to maintain the workforces they need.
The annual rise in salary budgets in 2022 was 4.1% which is the highest it’s been in the past 20 years. Salary budget rises in 2023 are projected to stay on track with these high numbers and grow just over 4%! However, this is still unfortunately under half of the current annual inflation rate.
So, how exactly should your organization be planning for salary budget increases with projected rising (or at the very least maintained) inflation rates? Keep reading to find out.
How to Create a Salary Budget
Creating a salary budget involves several steps:
Start by determining the total amount of money that your organization has available for salaries, ensuring that you consider your organization’s overall budget and specific payroll allocations.
Conduct an audit of staff members and their roles within your organization including – job responsibilities, qualifications, experience, and performance.
Research organizations similar to yours and the market rates and industry standards for their individual positions to determine a fair, competitive salary range for each role in your organization – it’s a good practice to consider other benefits that may be included in an employee compensation package like health insurance, retirement plans, vacation days, etc.
Determine the total number of employees needed to fill each position in your organization, calculating the total cost of each employee based on your market research in the previous step.
Compile this information into a detailed budget that includes projected salary and benefit expenses for the upcoming fiscal year.
Once you have created this detailed budget, you may have to review and adjust it throughout the year as needed based on factors that affect your organization’s salary expenses and allocations (financial situation, staff turnover, etc.).
Monitor and track actual salary costs & expenses throughout the year against your budget and make adjustments to stay within it. If you need assistance with either creating a salary budget, tracking real costs against it, or reviewing your employee’s market salary – Premier HR Solutions can help.
Download our compensation services brochure to find out how we can assist your organization with its 2023 salary budget and other employee compensation needs & considerations.