The cost of doing business: Pay increases may be muted in 2025

Boosting spending on technology remained ahead of pay increases for the second consecutive year in Gartner’s annual survey of CFOs and finance leaders. And while pay increases did maintain second place in terms of planned budget boosts for 2025, the volume of those increases is forecast to tumble.

Sixty-one percent of 300 leaders surveyed in October indicated they planned to boost pay by at least 4% in 2025, down from the 71% who planned on the same in 2024 and down from 86% in 2023.

“The slowdown in pay increases reflects falling rates of inflation and lower levels of voluntary employee attrition,” Randeep Rathindran, a vice president in the Gartner Finance practice, said in a news release. “However, even though the labor market is cooling, CFOs must balance the potential risks of attrition and low engagement as employees still face stubbornly high costs for household necessities.”

The survey wasn’t industry-specific. Sue Coffey, CPA, CGMA, AICPA & CIMA’s CEO–Public Accounting, wrote in a Journal of Accountancy article in November that AICPA flash polls conducted with the largest 500 U.S. firms outside of the Big Four found that 88% of firms had increased starting pay in the past 12 months and 82% had increased pay for three- to five-year talent. About 45% of respondents overall indicated they planned to continue to raise starting salaries and three- to five-year salaries in the six months ahead.

Coffey called it “encouraging” but added: “The profession has been facing a talent shortage, and it’s no secret that a major driver of this has been entry-level compensation in comparison to other fields that hire graduating business majors — fields like computer and information science, engineering, mathematics, and statistics. While lifetime earning potential for accountants is high (those who pass the five-year mark all the way up to partner bring home excellent salaries), without attractive and competitive initial offers, it has been difficult to entice new graduates.”

There are some signs that the tide may be turning. Recent data reveals that undergraduate enrollment in college accounting programs increased during the fall semester by 12% year-over-year.

The Gartner survey asked leaders to categorize their organizations’ planned level of investment in seven areas. Seventy-seven percent said their company planned to increase their budget for technology by at least 4%, followed by the same size of increase to average compensation per staff member (61%), cost of goods sold (60%), and staff headcount (55%).

“The continued focus on technology aligns with developments in traditional and generative AI, which promise to drive new offerings, enhance decision-making, and boost productivity,” Rathindran said.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.