Breaking News: Private Sector Salary Increases Slowed by Inflation Concerns
According to Mercer’s latest report, private sector employees will see smaller than usual wage increases in 2025. Close to half will receive a raise of less than 2.5%, thanks to companies’ cautious stance due to decelerating inflation.
Record Low Wage Increases Ahead
The annual survey by Mercer on compulsory annual negotiations (NAO) reveals that the median wage increase for this year will only be 2.5%. This is a stark contrast to last year’s figure of 4%, indicating caution among employers in granting substantial raises. In simpler terms, while half of the private employees will receive more than 2.5%, the other half will receive less.
“This marks a historic decline” in the allocation of budgets for wage increases, according to Mercer. Sophie de Heer, a remuneration consultant at Mercer France, noted that this trend is unprecedented since 2021 as it represents the highest level of wage freezes seen in recent years.
Economic Uncertainty Drives Caution
Inflation has seen a dramatic slowdown, falling to an average of 0.9% over the first six months of 2025, down from 2% in 2024 and 4.9% in 2023. This reduction in inflation does not justify high increases from previous years, leading companies to be more conservative in their wage adjustments.
Additionally, “between economic and political instability, there is no visibility,” de Heer said. Companies are thus returning to a modular strategy where non-managers receive general increases, while managers mostly get individual raises based on performance, pointing to a step back to pre-pandemic practices.
A Closer Look at Salary Negotiations
Data also indicates increased social tension with 84% of NAOs finalized by March, which is 9 points lower than last year. Employee dissatisfaction is evident through rising minutes of disagreement—21% at the end of March compared to 18% a year prior.
“After three years of strong increases, employees expected these levels to be maintained over time,” de Heer stated. However, companies are compensating by adding non-monetary benefits such as increased meal vouchers (15%), gender equality initiatives (13%), healthcare and provident coverage enhancements (7%), mobility (7%), and more.
Future Outlook and Company Strategies
As inflation remains a complex factor, companies aim to relieve workers through targeted benefits rather than across-the-board raises. This strategic shift might alleviate some pressures but also highlights a significant rethink in how businesses manage employee compensation.
Stay tuned for more updates on this evolving situation. archyde.com will continue to bring you the latest insights and trends in the world of wages and employment.
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