Chief financial officers are planning to increase budgets for employee compensation, according to a survey by Gartner, Inc.
In the survey, which asked 296 CFOs and senior finance leaders to understand how budgets and spending will change in 2024, 71% of CFOs seek to boost average enterprise-wide employee compensation in 2024 faster than inflation.
“Even with tighter economic policy and pressure from boards and investors on profitability and employee productivity, CFOs are outpacing inflation that has now almost returned to a neutral rate below 3%," says Alexander Bant, chief of research in the Gartner Finance practice.
Employee compensation is second only to technology with 82% of CFOs planning an increase in 2024.
Although there’s been a shift toward smaller pay increases compared to 2021-2023 when inflation was running near 8%, 71% of CFOs are planning to increase average pay by at least 4%, above the current rate of inflation in most major markets.
The proportion of CFOs planning to increase average employee compensation by 10% or more fell by 3 percentage points year-over-year. Fifty-eight percent are planning 4% to 9% increases, a notable drop from the 70% who had planned to do the same last year.
Planned Changes to Average Employee Compensation
Source: Gartner (March 2024)
“The fact that most CFOs are planning for pay growth that exceeds the level of inflation indicates how tight the labour market is right now, and how important it is to find and retain top talent,” Bant says.
Finance employee pay expectations also rising
In the finance function, CFOs will also need to meet rising pay expectations, with finance employees surveyed in the fourth quarter of 2023 expecting 7% growth in base pay.
“Finance employees entered 2024 confident in the labor market, and this manifests in high compensation expectations, high job-seeking behavior, and lower intent to stay in their current role,” says Bant. “CFOs know they can’t pay their way to retention forever and meet rising pressure on cost and profitability. Compensation is the top factor driving retention, but there are other levers that CFOs must pull to hold on to staff.”
Gartner experts have identified four talent retention drivers beyond pay that CFOs should invest in to improve retention in their function.
“Work-life balance, location, health benefits and vacation are all significant factors that improve retention and give CFOs additional levers beyond relying on just base pay increases.” said Bant.
Return-to-Office mandates could harm retention
After compensation, finance employees’ second and third top attraction drivers are work-life balance and location. Although multiple factors influence these drivers, employees’ work patterns play a major part.
Many organisations are increasing their expectations around employees’ days in the office. This certainly has the potential to disrupt work patterns that finance employees are largely satisfied with currently.
Gartner research found that implementing onsite mandates reduced intent to stay by 8% for the average knowledge worker, and 16% for high performing employees.
“Finance leadership should be clear that enforcing return-to-office mandates comes with attrition risk and should be weighed against the potential benefits,” says Bant. “Especially so in the current talent market where replacing those who choose to leave will not be easy or inexpensive.”
