The return of the pay raise: Why companies are betting on money over perks
In a competitive job market and AI-driven economy, companies from Walmart to startups are leveraging salary to drive engagement.
In January 2024, Walmart, the largest private employer in the United States, announced a strategic move to raise salaries for 4,000 branch managers.
What was surprising about this announcement was the goal, a cultural change within the organization. The move included raising the base salary of prominent branch managers from $130,000 to $160,000, and with bonuses and shares, their annual compensation reached $420,000 to $620,000. The stated objective, according to CEO John Furner, was to “give managers a sense of ownership.” He wanted branch managers to take responsibility for profitability, losses, and organizational culture. And instead of offering management workshops, team-building exercises, flexible schedules, or other perks, Walmart simply returned to a core motivator, financial reward.
This wasn’t the first time Walmart, which employs two million people worldwide, has used pay as a lever for cultural change. In 2015, the company raised hourly wages for its junior employees to boost satisfaction and engagement, and it worked. Over the past decade, Walmart’s employee retention rate has increased by 10%, and it has consistently ranked high on Fortune magazine’s “Best Companies to Work For” lists.
The move also involved a controversial element: returning employees to offices and requiring managers to live close to company headquarters. Following that demand, the CTO of one of Walmart’s brands resigned, refusing to relocate.
Just last week, Amazon announced plans to lay off 14,000 employees, even though its revenue in the last quarter grew 13% to $180 billion. The reason? Culture, not finances or artificial intelligence, explained CEO Andy Jassy. “We’ve grown and hired constantly,” he said. “You end up with more people and more layers… sometimes without realizing it, you can replace the sense of ownership among the people actually doing the work.” Amazon is far from the only company to announce layoffs in the near future.
While the market favors employers, with growing pressure to return to offices and intense competition for AI talent, companies - from giants like Costco and Starbucks to Meta, Salesforce, and tech startups - are increasingly returning to a fundamental tool: salary. Companies are using pay strategically to shape culture, foster a sense of belonging, boost satisfaction, retain employees, and attract new talent.
The cost of replacing an employee, screening, hiring, and onboarding a replacement, can be up to 33% more than the departing employee’s annual base salary, according to a 2025 Work Institute report on employee retention. This makes investing in fair or competitive wages financially prudent. Additional reports from Payscale and Gallup show that employees who perceive their compensation as fair are 27% less likely to leave, and that salary was the top reason for employee departures in 2024.
In recent years, amid efficiency gains, inflation, market slowdowns, and rapid AI-driven technological changes, companies appeared poised to tighten belts and resist wage hikes. But in 2025, alongside widespread layoffs, organizations are increasingly offering targeted pay increases, especially for critical roles like AI experts and managers who significantly impact culture and performance.
Among tech giants, competition for AI talent has led to enormous offers. Meta acquired Alexandr Wang’s startup for $14 billion, securing the founder and offering top engineers up to $300 million over four years to join its new AI lab. OpenAI offered signing bonuses of $100 million, and Google gave AI star Varun Mohan a $2.4 billion salary package.
Meta raised senior engineers’ and leading product managers’ salaries by an average of 10% at the beginning of the year, supplementing pay with restricted shares to retain talent. Salesforce targeted middle managers and salespeople capable of operating the company’s systems, offering salary increases of 10–30% to retain strong employees in a competitive high-tech market.
“In an era where AI is changing the rules of the game, organizations must rethink how they attract and retain talent,” says Lital Yaron, General Manager of iLeadX Executive Placement at iTalent Group. “Raising salaries remains a significant tool, especially for recruiting executives capable of leading technological transformation. In our recent survey of 300 Israeli high-tech executives, about 75% reported that candidates expect better pay or conditions. While salary is not the only factor, it remains critical, alongside hybridity, benefits, and meaningful work.”
Salary as a means of building trust
Recent salary increases reflect market conditions and budgetary prudence. According to Yaron, senior salaries have mostly remained stable with moderate adjustments: 87% of managers reported salary packages were unchanged or slightly increased, 28.1% saw moderate increases, 5% reported significant increases, and 12.8% noted decreases.
Globally, this trend is similar. Korn Ferry’s 2025 Global Salary Forecast reports an expected executive salary increase of around 4%, showing restraint even in prominent markets, alongside exploration of creative reward strategies like bonuses, equity, and long-term incentive programs (LTIPs).
Profit-sharing components can build trust, improve satisfaction, and reduce turnover, though only 19% of organizations use such programs. Transparency in distribution, disclosing how profits are calculated and allocated, fosters fairness and confidence in the workplace.
“Salary signals the value the organization places on employees’ abilities,” Yaron says. “However, companies that succeed in retaining talent also offer attractive conditions, flexibility, supportive culture, and a sense of purpose. In a world reshaped by AI, recruitment and retention strategies must evolve accordingly.”
