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Thanks to a tight labor market, salary budgets for workers are expected to grow 4.1% on average, according to the latest annual salary report from consulting firm Willis Towers Watson. Next year's planned pay increases would be the highest on record since 2008.

Almost two-thirds of employers plan to award raises in 2023 that are larger than last year, Willis Towers Watson found in a survey of more than 1,400 U.S. companies conducted in April and May.

Most employers reported that the pay increases are in direct response to the labor market, which has seen a turbulent couple of years. Early in the pandemic, layoffs were rampant, shooting the unemployment rate to a peak of 14.7% in April 2020.

Now, jobs are plentiful, and nearly all employers in the survey said they've been experiencing trouble hiring and retaining workers throughout the year. Federal data bears this out: For most of 2022, the unemployment rate has been below 4%, with job openings outnumbering available workers nearly 2 to 1.

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