German Companies Slash Salary Increase Budgets Amid Economic Uncertainty
A recent study by Lurse, 'Trends in Compensation and HR 2025/26', reveals that German companies are grappling with economic uncertainty, with many reducing their salary increase budgets. The study, based on a survey of 225 companies, highlights pay equity as a top challenge for HR departments.
The study shows a decline in budgeted salary increases over the years: 4.4% in 2023, dropping to 3.9% in 2024, and further to 3.3% in 2025. Looking ahead to 2026, most industries plan to maintain or reduce their salary increase budgets, with the exception of the electrical engineering and semiconductor industry, which plans a slight increase of 0.7 percentage points.
The chemical, pharmaceutical, and mineral oil processing industries currently have the highest budgets for salary increases at 4%, while the automotive industry has the lowest at 2.4%. Around 30% of companies have already consciously reduced their budgets due to economic tension. The EU wage directive has prompted 84% of companies to analyze income differences and reduce gaps.
The Lurse study paints a picture of German companies navigating economic uncertainty, with most planning to keep or reduce salary increase budgets in 2026. Pay equity remains a significant challenge, with 80% of companies naming it a top HR concern. Despite budget cuts, companies are actively working to address income disparities, with 84% analyzing and reducing gaps due to the EU wage directive.
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