Business Costs in 2025: Pay Raises May Slow Down

Companies are prioritizing technology investments over salary increases for the second consecutive year, with only 61% of leaders planning pay raises of at least 4% in 2025, down from previous years. While the accounting industry is seeing some wage growth, competition from higher-paying fields remains a challenge in attracting talent. Businesses continue to invest heavily in AI and automation, which may impact future salary trends and workforce dynamics.

Business Costs in 2025: Pay Raises May Slow Down

For the second year in a row, increased spending on technology has taken priority over salary hikes, according to Gartner’s annual survey of CFOs and finance executives. While compensation remains the second-highest budget priority for 2025, the extent of these pay raises is expected to decline.

Among 300 leaders surveyed in October, 61% planned to raise salaries by at least 4% in 2025, a drop from 71% in 2024 and 86% in 2023.

“The slowdown in salary growth reflects lower inflation rates and reduced employee turnover,” said Randeep Rathindran, a vice president in Gartner’s Finance division. “However, even as the labor market cools, CFOs must weigh the risks of attrition and disengagement, as employees continue to grapple with high living costs.”

The survey covered multiple industries. In a Journal of Accountancy article published in November, Sue Coffey, CPA, CGMA, and CEO–Public Accounting at AICPA & CIMA, noted that a flash poll of the 500 largest U.S. accounting firms outside the Big Four found that 88% had increased starting salaries over the past year, while 82% had raised pay for employees with three to five years of experience. Looking ahead, about 45% of firms planned further increases for both entry-level and mid-career positions over the next six months.

Coffey viewed the trend as positive but acknowledged that the profession continues to struggle with attracting new talent. She pointed out that starting salaries in accounting have not kept pace with other fields competing for business graduates, such as computer science, engineering, mathematics, and statistics. While long-term earning potential remains strong—especially for those advancing to partner level—initial pay packages need to be more competitive to draw new graduates into the field.

However, some encouraging signs have emerged. Recent data shows a 12% year-over-year increase in undergraduate enrollment in accounting programs during the fall semester.

The Gartner survey also examined planned investment levels across seven categories. Technology spending led the way, with 77% of respondents expecting at least a 4% increase in their tech budgets. Compensation followed at 61%, trailed by cost of goods sold (60%) and staff headcount (55%).

“The continued emphasis on technology aligns with advancements in both traditional and generative AI, which are expected to drive innovation, improve decision-making, and enhance productivity,” Rathindran said.

Talent Retention and Compensation Challenges

The survey covered multiple industries. In a Journal of Accountancy article published in November, Sue Coffey, CPA, CGMA, and CEO–Public Accounting at AICPA & CIMA, noted that a flash poll of the 500 largest U.S. accounting firms outside the Big Four found that 88% had increased starting salaries over the past year, while 82% had raised pay for employees with three to five years of experience. Looking ahead, about 45% of firms planned further increases for both entry-level and mid-career positions over the next six months.

Coffey viewed the trend as positive but acknowledged that the profession continues to struggle with attracting new talent. She pointed out that starting salaries in accounting have not kept pace with other fields competing for business graduates, such as computer science, engineering, mathematics, and statistics. While long-term earning potential remains strong—especially for those advancing to partner level—initial pay packages need to be more competitive to draw new graduates into the field.

The ongoing labor shortage in some industries has forced companies to reassess not only salaries but also benefits and workplace flexibility. Many businesses are expanding their offerings to include hybrid work options, wellness programs, and professional development initiatives to attract and retain employees.

Rising Investment in Technology

Despite the moderation in pay increases, investment in technology continues to rise. The Gartner survey examined planned spending across seven budget categories, with technology leading the way. Seventy-seven percent of respondents expected to increase their tech budgets by at least 4% in 2025. Compensation followed at 61%, trailed by cost of goods sold (60%) and staff headcount (55%).

“The continued emphasis on technology aligns with advancements in both traditional and generative AI, which are expected to drive innovation, improve decision-making, and enhance productivity,” Rathindran said.

With AI-driven automation, many businesses aim to streamline operations and reduce reliance on human labor in certain roles. This shift could further impact salary growth in the long run, as companies invest more in digital solutions to handle repetitive tasks.

Future Outlook

While overall pay increases may be slowing, some industries and specialized roles continue to see strong demand. The finance and tech sectors remain competitive, and companies looking to attract top-tier talent in these fields may need to offer more than just salary increases.

Meanwhile, some positive signs for the accounting profession have emerged. Recent data shows a 12% year-over-year increase in undergraduate enrollment in accounting programs during the fall semester. If this trend continues, it could help alleviate some of the talent shortages seen in recent years.

As businesses navigate economic uncertainty, balancing investment in technology with competitive compensation strategies will be key to maintaining productivity and retaining skilled employees in 2025 and beyond.