Compensation Review 2025: How to Make Data-Driven Decisions in Uncertain Times

Jun 6, 2025

To conduct a successful salary review, it’s crucial to understand current market trends. This often requires analyzing various and inconsistent data sources, which can mean a lot of work, especially when planning a salary review. Here are some key insights and practical tips based on current market data.

Current Trends in the European Tech Sector

The European tech sector has cooled significantly after years of record growth:
1. Hiring rates have decreased by 15% year-over-year, from 34% to 29%.
2. Non-promotion salary increases at growth and late-stage companies have dropped to 5% and 4.9% respectively.
3. Attrition rates have fallen by 33% compared to the previous year

Planning Salary Increases

When planning salary increases for the coming year, companies should consider the following:
1. The majority of companies are planning salary increases of 3-5%.
2. 41% of respondents plan performance-based adjustments, while 38% aim to consider both inflation and performance.
3. Non-monetary compensation is gaining importance, as 61% of companies face difficulties in retaining talent through cash compensation

Practical Tips for a Successful Salary Review

1. Analyze Market Data: Utilize current salary surveys and industry reports to get a clear picture of market trends
2. Ensure Internal Equity: Review salaries within your company to identify and correct discrepancies between similar positions
3. Incorporate Performance Evaluations: Consider individual employee performance when determining salary increases
4. Set a Budget: Define a clear budget for salary increases that takes into account both company goals and market conditions
5. Improve Communication: Ensure the process is transparent and clearly communicate the criteria for salary increases
6. Consider Alternative Forms of Compensation: Consider non-monetary benefits such as improved training opportunities or more flexible working conditions
 
By considering these factors and careful planning, companies can conduct a fair and effective salary review that supports both employee satisfaction and company goals.

Conclusion

The 2025 compensation review comes at a time of economic uncertainty and rising employee expectations. Companies that make data-driven decisions, ensure internal fairness, and explore alternative forms of compensation beyond cash will gain a clear advantage. Combining pay transparency with strategic planning not only builds trust but also strengthens employee retention and long-term competitiveness.

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