After years of pay increases, workers may be left wanting in 2025 as businesses face tighter bottom lines.
Whether it is inflation or trade wars — or both, businesses are a bit wary and watching their expenses, including employee salaries.
Transparency and open communication are essential when it comes to discussing salaries, says Ian Weide, director of business development at Seek Careers/Staffing in Green Bay.
“Companies are being more transparent with their employees about their increased costs or how business is going,” he says. “With the economy the way it is, people are hesitant to start new projects or expansions, which can make businesses run slower.”
Anne Wettstein, president and senior human resources consultant at Human Resources Consulting, LLC in Green Bay, says building trust between employers and workers is a must. A part of that trust is making sure regular reviews and one-on-one meetings continue, even if a large pay increase isn’t in the offering.
“Being transparent is important, and providing information to employees about what is going on is essential. You need to build that trust,” she says. “It’s worse when employees begin to guess about what is going on and misinformation begins to spread.”
Being open about how businesses are doing and what that may mean for wage increases shows that employers want to be partners with employees, Wettstein says.
A tighter labor market has given businesses an edge in the employer/employee dynamic, Weide says.
“During and coming out of the pandemic, it was an employees’ market as workers had more leverage, but now employers have more leverage,” he says.
More employers are also seeking to tie performance goals to pay increases, Weide says. “If an employer reaches a goal, the employees benefit. Or it could be based on individual goals. If an individual reaches them, they receive a bonus,” he says.
After the pandemic, a majority of Wettstein’s clients looked at what they were paying their employees. “Employers saw that what they were paying their workers wasn’t keeping up with the market, so they made some big adjustments,” she says. “With inflation and worries about tariffs, that’s not possible right now. But there are other ways organizations can show their appreciation.”
Beyond pay
Pay remains important to employees, employers acknowledge — nearly 1 in 3 respondents to Payscale’s 2025 Compensation Best Practices Report said unfair pay was the primary reason they lost talent.
“We’re anticipating a ‘Year of Contention,’ as 2025 could bring a clash between employers tightening budgets and employees advocating for fair pay and better working conditions,” said Payscale’s Chief People Officer Lexi Clarke, in an issued statement.
But Wettstein says there are other steps employees can take to make up for not giving a large pay raise.
“Flexibility is a big one. Providing employees with flexible work hours or letting them work from home for part of the time are benefits that have little or no cost,” she says. “You want to create a work environment where people want to be — that they don’t start looking elsewhere.”
Some employers also offer summer hours, where the office closes at noon on Fridays between Memorial Day and Labor Day, as another extra for employees. Hosting potlucks or special food days is another small way employers can make employees feel valued.
“Now is a good time to look at your vacation and PTO programs and see if they are competitive,” Wettstein says. “It’s also good to start offering some PTO or vacation from day one and not make an employee go a whole year with practically no time off.”
Wettstein recommends employers continue to offer learning opportunities for their employees, whether it’s online or in-person sessions to expand their skills.
“That shows employees that you respect them and value them,” she says. “That all contributes to a good, positive work culture where people want to be.”
In her consultancy, Wettstein sees what different employers are offering their workers and will share that information if a business is looking for a way to reward its workers. “It’s easy to say, ‘I have a client that did this’ and it opens up more opportunities, she says. “Businesses should look around and see what others are doing.”
Weide says offering employees access to certain benefits, such as pet insurance or time with a financial advisor, can also make up for smaller pay increases.
“Everyone wants a big pay raise, but if the business is transparent with employees about why that’s not happening and can show in other ways that employees are appreciated, that’s a good thing,” he says.
