Salary increases in 2025: What to expect across European tech

What is the average salary increase in 2024? How will salary increases change in 2025? What percentage of employees typically receive a promotion, and how much does that impact their pay rise?

These are some of the key questions on the minds of HR and Reward leaders as they navigate the current compensation review cycle.

With rising expectations and cautious growth plans, competitive salary increases are essential to attract and retain top talent. Yet, balancing these increases with tighter budgets and shifting market trends remains a challenge for European tech companies.

According to our latest Compensation Trends report, 69% of European tech companies cited uncompetitive compensation as their top barrier to attracting top talent. This ranks higher than issues like competitive benefit packages (32%) and a weak employer brand (27%).

Having up-to-date salary benchmarking data is crucial for HR teams to stay competitive, but with market conditions in constant flux, traditional annual salary surveys from providers like Radford and Willis Towers Watson are falling short. Companies today need more agile, real-time compensation data to adjust quickly and remain competitive in a fast-paced environment.

What does an annual salary increase mean? 

An annual salary increase refers to the yearly percentage pay increase that employees receive, independent of promotions or changes in role. These adjustments are designed to keep employee compensation competitive and aligned with market trends, inflation, and the cost of living.

At Ravio, we define annual salary increases separately from promotion-based pay adjustments, which are tied to moving up to the next job level in the levelling framework.

By distinguishing between these two types of pay rises, companies can better assess how real-time market trends influence overall salary levels without the additional layer of employee promotions.

Annual salary increases also play a crucial role in an employee’s progression through their salary band. Salary bands are typically structured to allow for 3-4 years of progression, with a 15% range on either side of the midpoint. Employees generally see a 5-10% annual salary increase during this time before advancing to the next level or salary band.

By tracking annual salary increases as a year-over-year percentage change, HR teams can evaluate how these adjustments interact with trends like hiring rates and attrition. This data is essential for using salary increases as a tool to retain top talent, maintain employee engagement, and ensure pay equity across various roles and levels.

Different approaches to determining a salary increase: Is there a right or wrong one?

When determining salary increases, companies often balance several factors, including employee performance, inflation, and market competitiveness. 

But one thing that seems to divide compensation managers is whether or not salary increases should be performance-based, market-based, or a mixture of both.

There are pros and cons to each side, which is why Ravio included in this question in the survey for our Compensation Trends report:

• 41% of companies primarily base salary increases on performance, using performance reviews and key performance indicators (KPIs) to reward high achievers with larger raises or equity refreshes. This approach helps retain top talent but can lead to pay disparities if not carefully balanced with market data.
• In comparison, only 10% of companies focus mainly on inflation adjustments when increasing compensation, ensuring that salaries keep pace with rising living costs, particularly in times of economic volatility. This approach helps maintain purchasing power but may lack the individualised reward that performance-based increases offer.
• 38% of companies take a hybrid approach, adjusting salaries for both performance and inflation. This method ensures that high performers are rewarded while also protecting employees' salary expectations, and is normally the more popular choice amongst HR professionals. It provides a more comprehensive solution by addressing both individual contributions and the need to stay aligned with the broader market.

Some companies also opt to give an across-the-board salary increase to all employees, such as a 5% increase based on market trends or inflation. Others tailor the increase per employee (or team) based on performance or their current position within their salary band, or a combination of both approaches with the use of a merit matrix.

For those who take a hybrid approach, the best way to manage this is through a merit matrix. 

According to Ravio data, 49% of companies use a merit matrix, which combines performance ratings and market data (like compa-ratio) to determine salary increases. This balanced method ensures that high performers are rewarded while keeping pay competitive and aligned with the market.

What was the average salary increase in 2024?

According to Ravio’s latest Compensation Trends report, which analysed over 300,000 data points from 1,000+ companies, salary increases across European tech companies dropped by 14% compared to the previous year.

In 2023, the average salary increase across European tech was 5.8%. However, in 2024, this figure has decreased to 5%. While this may seem like a small change, a 14% decrease is statistically significant, signaling a meaningful shift in salary increase trends.

What will the average salary increase be in 2025?

Looking ahead to 2025, salary increases are not expected to change significantly.

Based on Ravio’s survey data, 55% of companies predict that salary increases for non-promotions will fall between 3-5%, indicating a continued shift toward more cautious growth and financial stability over aggressive pay rises.

Despite these more modest increases, salary adjustments remain a priority for most companies.

Only 2% of European tech companies plan to freeze salaries in 2025, while 91% expect to adjust compensation through base salary increases, bonuses, or equity refreshes. This highlights that while companies are being conservative, the majority still plan to offer some form of salary increase to stay competitive.

Salary increase trends across company growth stages 

Salary increases vary significantly depending on a company’s stage of growth.

Early stage companies have actually increased their salary increases in 2024, with the average salary increase reaching 6.5% – higher than the overall median. 

This trend highlights the growing focus on talent acquisition in early stage businesses. According to Ravio data, early stage companies are leading the way with a 41% hiring rate – far higher than growth and late stage companies.

This is largely down to funding. Data from Crunchbase shows that early-stage funding in Europe has outpaced late-stage funding in three of the last five quarters. In Q1 2024 alone, $5.4 billion was invested in over 300 early-stage European startups.

Growth stage companies, however, have experienced the sharpest decline in salary increases compared to last year. The average salary increase for these companies in 2024 is 5%, putting them close to late-stage companies. With global funding for growth stage businesses dropping by 54% in Q1 2024 compared to the previous year, these companies are prioritising sustainable growth over aggressive salary hikes.

Late stage companies, often larger and more financially stable, continue to offer more modest salary increases, averaging around 5% in 2024. These companies tend to focus on maintaining internal pay equity and managing their compensation structures carefully to avoid salary compression, especially as they prepare for potential IPOs.

Salary increase trends for new hires

According to Ravio’s survey, nearly half (49%) of companies slightly increased base salaries for new hires in 2024, while 37% maintained salary offers at levels consistent with previous years. While it’s encouraging that salary increases have not declined for new hires, only 6% of companies opted to significantly raise starting salaries.

This cautious approach to new hire compensation reflects a broader trend of balancing budget constraints with the need to attract talent. However, companies that fail to adjust base salaries for new hires risk losing top talent to competitors that are willing to pay above market rates.

Will most European tech companies offer salary increases in 2025?

The overwhelming majority of European tech companies plan to offer salary increases in 2025, with more than 91% of companies expecting to adjust salaries during the upcoming compensation review cycle.

However, while most companies are planning for salary increases, the size of these adjustments may be more modest compared to previous years. In fact, 41% of companies intend to adjust salary increases based on performance, which could lead to internal pay equity challenges if not carefully managed.

What percentage of employees will receive a salary increase in 2025?

According to survey respondents, 34% indicated that over 75% of their employee base will receive a salary increase in the next compensation review, even without a promotion. This suggests that many companies are adjusting salaries for the majority of their workforce based on a mix of external market factors and employee performance.

How does this compare with Ravio data?

Interestingly, this contrasts with Ravio’s data, which shows that only 21% of employees have received an annual salary increase in the past two years. This gap highlights a disconnect between employer intentions and actual outcomes, suggesting differences in how companies approach salary reviews.

To follow best practices, Ravio recommends that the majority of employee salaries be adjusted slightly each year to reflect changes in market data and ensure pay progression. Regular salary adjustments are crucial for retaining talent, maintaining employee engagement, and ensuring compensation remains competitive.

Other compensation trends featured in Ravio’s report

To be competitive, companies today must adopt a holistic approach to compensation management, with HR leaders overseeing the entire spectrum of compensation and ensuring compliance with evolving regulations. 

Here are some key compensation trends that we cover in more detail in our report. 

Hiring and attrition rates

Alongside salary increases, hiring and attrition rates have also seen significant declines compared to last year. Hiring rates have dropped by 15% YoY, while attrition rates have plummeted by 33%, indicating that employees are staying in their roles longer amid current market conditions. 

Dive deeper into these compensation trends across European tech in Ravio's Compensation Trends report.

Equity compensation

According to Sifted, equity compensation across European companies is down by 25% compared to last year.

Discover which countries offer the most amount of equity compensation to all employees in Ravio's Compensation Trends report.

Pay equity and pay transparency

The growing momentum behind pay transparency legislation, especially the upcoming EU Pay Transparency Directive, is compelling more companies to rethink their compensation structures. 

Pay transparency is designed to eliminate gender pay gaps and promote fairness in how employees are compensated. As these laws come into effect, companies will need to ensure that their salary bands, pay reviews, and promotion practices are transparent and equitable. This is not only a compliance issue but also a reputational one - employees increasingly expect openness around pay.

Explore more about how European tech companies are managing pay equity in Ravio's Pay Equity report.

Benefit packages

Competitive benefit packages are becoming increasingly essential in attracting and retaining talent. While salary increases remain important, more companies are offering enhanced benefits that cater to the needs of today’s workforce.

Explore what L&D opportunities are available across European tech companies in 2025 in Ravio's Compensation Trends report.