A market adjustment raise is a salary increase designed to align employee compensation with current market rates for their role and location.
Your top engineer-making top dollar in Ohio-recently relocated to Osaka. They learn that the junior programmers there are making more than they are.
That's a problem, and the solution is a market adjustment raise.
Compensation gaps naturally develop over time as market conditions change. Economic shifts, industry growth, talent shortages, and regional variations all push salary benchmarks in different directions. Companies use market adjustments to keep their pay scales competitive within their specific markets and industries.
Market adjustments work differently from merit increases or promotions, since employee performance doesn't factor into these decisions at all. HR teams take only external market data into account to determine if current pay levels will attract and maintain good talent.
These adjustments have become a key retention strategy for employers worldwide. Companies that regularly benchmark and adjust compensation to market rates see lower turnover. This approach is essential in competitive job markets where skilled professionals have plenty of other options.
Global organizations deal with extra complexity when making market adjustments. Economic conditions, cost-of-living differences, and local employment laws vary significantly across regions. Companies need to balance global compensation consistency with local market realities while maintaining fair pay structures. The goal is equity management that works across different countries and regions.
Why employers offer market adjustment raises
Organizations implement market adjustment raises as a strategic response to evolving workplace dynamics and economic pressures. These proactive compensation moves serve multiple business objectives that extend far beyond simple salary corrections, allowing companies to:
- Retain top talent in competitive labor markets. Companies use market adjustments to prevent valuable employees from accepting higher-paying opportunities elsewhere, particularly when skilled professionals have multiple job options available.
- Respond to shifts in salary benchmarks or inflation. With salary increase budgets reaching 3.2% so far in 2025 - well above the current 2.4% inflation rate-employers adjust compensation to maintain purchasing power and stay aligned with industry standards.
- Address internal pay equity issues between employees in similar roles. Market adjustments help eliminate compensation disparities that develop when new hires receive higher starting salaries than existing employees in equivalent positions.
- Stay aligned with evolving compensation expectations for in-demand skills. Organizations adjust pay rates to reflect the increased market value of specific technical skills or specialized expertise that become more valuable over time.
- Ensure compliance with pay transparency or fair wage laws. With one in three U.S. employees now covered by pay transparency legislation, companies implement market adjustments to align with disclosed salary ranges and meet regulatory requirements.
- Prevent costly turnover and maintain workforce stability. Market adjustments address compensation gaps before they lead to resignations, helping organizations avoid the significant costs associated with recruiting, hiring, and training replacement employees.
- Build employer brand reputation and attract future candidates. Companies that proactively adjust salaries to market rates demonstrate their commitment to fair compensation, strengthening their ability to recruit quality talent in competitive hiring environments.
Notably, 70% of organizations are planning for pay equity adjustments in 2025, with most earmarking 0.5%-1.0% of payroll specifically for off-cycle market and retention adjustments. This widespread adoption reflects how market adjustments have become an essential component of modern compensation strategy rather than an occasional corrective measure.
When are market adjustments made?
Market adjustment raises don't follow a set schedule. They happen when market conditions shift or internal reviews reveal pay gaps that could hurt retention and competitiveness.
Annual compensation reviews are the most common time for market adjustments. Most companies run salary benchmarking alongside their regular merit and promotion cycles. This timing lets HR teams spot employees who've fallen behind market rates and address multiple pay gaps at once.
Role changes often trigger immediate adjustments. When someone's job responsibilities grow significantly, HR typically conducts a formal evaluation to see if the role now matches higher-paying positions in the market. These reviews frequently show that job descriptions haven't kept pace with how roles have actually evolved.
Market shifts and pay audits can prompt urgent off-cycle raises. Sometimes salary surveys reveal major gaps that can't wait until the next review cycle. Local market changes from inflation, talent shortages, or competitive pressure also create situations where immediate action is needed. For distributed teams, cost-of-living changes across different locations may require targeted geographic adjustments to keep compensation fair and competitive.
Despite these prompts, market adjustments remain volatile in 2025. "Uncertainty surrounding future economic conditions, and whether broad changes to immigration and trade policies will be implemented, have employers feeling anxious regarding the direction of compensation costs this year and beyond," Sydney Ross, economic researcher at SHRM, said in April.
"In such an uncertain environment, it is likely that many employers are in wait-and-see mode and will take a more cautious approach as they devise their pay and compensation strategies going forward," Ross adds.
Tips for global employers
Implementing market adjustment raises across international borders adds layers of complexity that go far beyond simple salary benchmarking.
- Market rates vary by country, city, and even job type. A software engineer in San Francisco commands a vastly different salary than the same role in Prague or São Paulo, with major cities often having significantly higher compensation than smaller markets.
- Currency fluctuations pose challenges to the total compensation value. Exchange rate movements can quickly erode or inflate an employee's actual salary value compared to global peers, which demands ongoing monitoring and adjustments.
- Global pay equity must balance market competitiveness and internal fairness. Companies must choose between paying local market rates or maintaining consistent global salary bands, with neither approach being perfect for all situations.
- Local labor laws add complexity to salary adjustment timing and implementation. Some countries require specific notice periods or employee consent for compensation changes, while others have strict regulations about when increases can be made.
- Remote work policies have created new location-based salary considerations. Companies now must decide whether to adjust pay when employees relocate or work temporarily from different countries.
Success in global market adjustments requires reliable data and expert partnerships. Employers need access to accurate compensation benchmarks for each geography and should partner with global payroll providers or employer of record (EOR) services to ensure adjustments are competitive, compliant, and properly executed across different countries and currencies.
Strategic impacts
Market adjustment raises deliver measurable strategic benefits that extend far beyond individual compensation corrections. These adjustments directly combat talent attrition while strengthening employer brand positioning.
Companies that proactively address below-market pay prevent valuable employees from accepting competing offers, especially critical when skilled professionals have multiple opportunities. This practice builds a reputation for fair compensation that enhances competitiveness in global hiring markets, where attractive compensation policies expand access to top international talent.
Strategic market adjustments reduce legal exposure related to pay disparities and compliance violations. With pay transparency legislation covering more and more U.S. employees and similar laws expanding globally, companies that maintain market-competitive salaries avoid regulatory issues before they develop. Regular compensation reviews and adjustments help organizations stay ahead of equal pay requirements while minimizing risks associated with underpayment claims or internal pay equity disputes.
Seamlessly manage market adjustments with Pebl
You want your talent to be paid their worth, but knowing what to pay who where can be a headache. Navigating global market adjustments requires expert guidance and reliable infrastructure to ensure competitive, compliant compensation.
So why not let us help?
At Pebl, our Employer of Record services, global payroll capabilities, and local expertise in 185+ countries worldwide enable organizations to handle market adjustments seamlessly.
Our experts know the ins and outs of fair compensation from Aruba to Azerbaijan, and with our centralized global payroll, we can make adjustments across the globe in real-time. Get in touch to learn more.
Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided "as is," and no representations are made that the content is error-free.
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