5 Sentiments Defining the Compensation Climate in 2025

5 Sentiments Defining the Compensation Climate in 2025

The mood around compensation is shifting fast, and HR leaders need to stay ahead. Not sure where to begin? At Paidwell, we’re always keeping tabs on the hottest topics of conversation and transforming those observations into insights you can really use to shape a successful comp strategy.

Here are five standout sentiments your team should keep in mind right now.

1. Pay Dissatisfaction Is High, Even When Salaries Rise

Inflation has made employees feel like raises aren’t keeping up, even if companies have actually increased pay. As of 2024, 53% of Americans felt their pay wasn’t keeping up with inflation, with that number likely to continue rising. Salaries that once felt competitive feel much less satisfying when purchasing power is shrinking. Add to that a growing emotional undercurrent of anxiety and underappreciation, and employees are increasingly willing to explore new opportunities: according to a Monster survey, as many as 93% of Americans are at least considering a job search this year.

To combat this ongoing sense of dissatisfaction, focus compensation conversations on more than just base salaries. Focus on the overall employee value proposition, including competitive health benefits, additional financial benefits (such as retirement matching or financial advising), career pathing, flexible work options, and extra “fun” perks.

Key strategy: Competitive pay must be paired with clear communication about total compensation value (benefits, growth opportunities, flexibility).

2. Fairness and Pay Equity Are Under the Microscope

With pay transparency laws rolling out in more states and countries, employees are more aware than ever of pay gaps. The perception of fairness matters just as much as actual numbers. One study found that if pay transparency policies revealed an equitable and fair structure, it had a positive impact on productivity, but if it revealed inequities, productivity plummeted.

Internal comparisons (between departments, between remote vs in-office workers, and other divisions) are fueling frustration. HR teams need to have a game plan in place to address these concerns proactively. Have key answers ready to go, and have a strong communication strategy to ensure that everyone is on the same page and has the correct information. In an information vacuum, rumors can spread fast, so take the information reins from the start.

Key strategy: Regularly audit internal equity and be ready to explain compensation decisions clearly and proactively.

3. Flexibility and Work-Life Compensation Are Now “Pay” Factors

Many employees are mentally “adding” flexible work arrangements to their idea of compensation. Flexible and hybrid jobs are highly in demand, with 94% of workers surveyed by Deloitte saying they believe they benefit from flexible work. Those benefits include increased productivity, work-life balance, and improved mental health.

On the flip side, a fully in-office job often needs higher salary offers to compete with remote/hybrid options. Again, this is where compensation must go beyond just base pay. In addition to offering flexible work options, consider how your compensation package can support work-life balance. This might include perks like childcare or commuting funds, mental health coverage, and other options.

Key strategy: HR teams must account for and highlight non-monetary forms of compensation when shaping offers and internal communications.

4. Raises Without a Clear Path Are Losing Impact

Financial raises are only half the story. Today’s employees are equally concerned with their actual career paths, from promotions to upskilling and long-term career planning. A one-time raise without a visible career progression plan feels hollow to many employees. With the OECD predicting that 1.1 billion jobs will be “radically transformed” by technology within the decade, “Where am I going next?” is often more important to today’s employees than “How much did I just get?”

A 2022 Gartner survey revealed that only about one-third of employees look for internal job opportunities when they’re ready to move into a new role. Why? Because they’re not confident that their current organizations are interested in helping them build a long-term career. Loyalty goes both ways, after all. It’s an uncertain world, and employees want to know about their future compensation and career possibilities, not just the “right now.”

Key strategy: Tie compensation discussions to career pathing, skill-building opportunities, and longer-term development plans.

5. Employees Are Talking About Pay — Publicly

Sites like Blind, Glassdoor, and LinkedIn salary disclosures mean employees are no longer guessing about your compensation. They’re comparing, organizing, and talking. In 2019, a CareerArc survey found that 55% of candidates would abandon a job application if they read negative online reviews; that number has likely increased by now, given the state of the post-pandemic talent landscape. In a more competitive talent marketplace – and one where more candidates are more thoughtful about their job choices – poor pay practices are more visible (and more reputationally damaging) than ever.

Instead of looking for complicated ways to conceal information, take the opposite approach: build a compensation program designed for transparency. Career paths, pay levels, and pay-for-performance policies should all be created with the idea that they will be publicly discussed. Companies with a reputation for transparency and trust are more likely to attract and retain top talent, even in challenging times.

Key strategy: Assume all pay practices will be public at some point. Build compensation strategies with transparency and defensibility from the start.

Today’s pay sentiment is emotional, comparative, and hyper-aware. HR teams need to lead with transparency, fairness, total value communication, and career-linked growth — not just salary increases. With a well-rounded approach, your compensation strategy can be the crown jewel of your approach to talent. For more insights, tips, and up-to-the-minute data, talk to Paidwell and discover how our pay-for-performance solutions can elevate your compensation and your employer reputation above the rest.