Wage inflation for IT Solution Providers (TSPs) projected to improve in 2025
Wage inflation is poised for a notable rebound in 2025. After hitting a peak in 2022 and experiencing a cooling period in 2023 and 2024, we’re finally seeing projections that hint at a return to historical norms. This is a vital indicator of healthier global economic trends. When wage inflation finds its rhythm, it’s a win-win: employees feel valued, and companies stabilize their compensation frameworks.
Peter Kujawa, EVP & GM of Service Leadership & IT Nation, encapsulates this sentiment, stating that 2025 is set to deliver the most meaningful wage inflation improvements since 2023. For IT solution providers (TSPs), this momentum is key. It reflects a broader stabilization of operating costs, providing a stronger foundation for innovation and growth.
Disparities in wage increase strategies
Not all TSPs approach wage increases the same way. Best-in-class TSPs adopt a calculated and restrained approach to compensation. Only 9.9% of their employees are slated to receive raises exceeding 6%, while in bottom-quartile TSPs, that figure jumps to 29%. Why the gap? Top performers focus on precision, investing strategically in talent retention while safeguarding financial efficiency.
Interestingly, 31% of employees at best-in-class TSPs will see raises capped at 3% or less, showing their disciplined approach to payroll management. This contrasts sharply with bottom-quartile TSPs, where compensation strategies are more reactive and broader in scope. Such differences reflect a deeper divide in operational philosophies between leading and lagging companies.
Regional trends in wage increases for IT TSPs
The world map of wage increases reveals striking regional nuances:
- Europe: The continent is adopting a cautious stance. High wage increases (over 6%) are expected to drop by more than 50% from 2024 to 2025. Meanwhile, minimal raises (3% or less) will rise, from 31.6% to 41%. This is a deliberate pivot toward financial sustainability.
- United States: A balanced approach is evident, with 63.3% of employees projected to receive raises within the 3.1%–6% range. This positions the U.S. as a leader in moderate yet meaningful adjustments.
- Australia/New Zealand: Employees in these regions are benefiting from an upswing, with 57.0% expected to receive raises between 3.1% and 6%. This represents a 16% increase from 2024, signaling a shift toward mid-level pay adjustments.
- Canada: The outlier, Canada, projects the most conservative increases. Only 7% of employees are expected to receive raises above 6%, while a substantial 42% will see raises limited to 3% or less. A conservative approach may reflect cautious economic conditions or a focus on cost control.
Differences in compensation strategies
The compensation strategies of Managed Service Providers (MSPs) and Value-Added Resellers (VARs) couldn’t be more distinct. MSPs lean toward more comprehensive wage adjustments, while VARs are tightening their belts. Among best-in-class VARs, nearly 41% of employees are projected to receive raises of 3% or less which shows a divergence in operational priorities: MSPs tend to emphasize staff retention and growth, while VARs often navigate tighter margins and higher cost pressures.
This contrast is a reflection of how each business model adapts to external economic challenges and internal priorities. VARs may need to revisit their compensation strategies to remain competitive in a tightening talent market.
