With the subject of inflation on everyone’s mind, there’s also an active discussion about how this might affect salaries this year. Heads-up, while we talk often of freelance gigs, this article is more applicable to full-timers with annual salaries. Freelancers, however, can still use this info to gauge how to budget this year and how to price their services while staying competitive. We should also mention we are not licensed financial advisors, so any information you gain below, we advise that you talk with a professional before making any important money moves.
With all that said, here's what we know so far...
Some new jobs are available but while layoffs continue
The end of 2022 saw 235,000 new jobs added to small and medium-sized corporations, while larger ones and venture-backed startups cut back on adding positions. As this trajectory moves through the beginning of 2023, we may continue to see some layoffs in those same large companies and start-ups (especially in the tech sector) before the first quarter begins. However, as we’ve covered, when it comes to layoffs, this is typical for this time of year due to budgeting. And with the number of new jobs that have just been added (instead of a hiring freeze), there’s hope for those looking to get hired.
Higher health insurance expenses may affect take-home salary
Because of the state of the economy, health insurance prices are going up. January is often enrollment time for new health insurance plans. Many employers are looking to cut costs and, instead of cutting jobs, they may opt for cheaper medical plans that shift more responsibility to you, the employee. Some people might notice that their take-home salary is a bit lower, due to higher healthcare premiums. Keep in mind, though, these tradeoffs all depend on the size of your company and what it can afford. Smaller companies, startups, and agencies will feel this shift the most while larger companies that can afford the increase in cost will see little salary change.
Tax adjustments will also affect your take-home salary
Back in October, 2022, the IRS announced tax inflation adjustments for 2023. In this announcement they list updated tax brackets (among many other factors) that everyone should take into account while earning and filing this year. As a result, most will see higher taxes coming out of their salary, but this often means they will receive a refund come tax time. Again, if you have any questions on taxes, it’s best to reach out to a financial advisor or local tax professional to help you make the best decision for you and your family.
What salary changes to expect:
Fewer of us will see raises in our salary this year than normal. Those who do see raises in their salary, however slight, might be put in a different tax bracket this year, changing how much they will take home, and owe or receive after filing. You may also have to change health plans which may affect your take-home pay.
Here’s some motivation on how to proceed:
Stay flexible, save, and budget well
Remember that we’ve been here before and we will, no doubt, go through low points in the economy in the future. You can create your own budgeting plan and open a savings account to help protect you from any sudden changes that come your way. You might even be in a great place to hire a financial planner to take care of your budget for you while offering advice on how to proceed through the year.
Know what you owe
Take a look at your paycheck and assess what you’re paying in taxes, especially if you were one of the few who received a salary bump. If you did, it may put you in a different tax bracket for 2023. You might need to adjust your W2 or W9 as soon as possible so that you do not end up owing when it comes to tax time. Do this before or as soon as you begin receiving your higher paycheck to avoid any penalties.
Invest in yourself
Not all financial benefits come to you solely through your salary. After Congress passed an updated version of the Secure Act last year (AKA Secure Act 2.0), you may be able to get a match from your employer on your 401k or 403b plan if you have student loan debt. If your employer is participating, that means you don’t have to choose between a retirement match and help with paying your loans. You can have both! But you must discuss it with your employer first, see what they’ll offer, and enroll at the appropriate time.
Lastly, keep your head in the game and bet on yourself always. If you’re looking for a new job or need advice on how to position yourself in the new year, reach out! Our recruiters can help.