Prepositional phrases begin with a preposition. Fancy, huh?
"In" is the only preposition in this sentence, so the prepositional phrase is "in their salaries." Notice that this phrase is not necessary for the sentence to make grammatical sense; it modifies and further explains "increase."
Prepositions usually define a location, either physical or theoretical.
Other prepositions include: about, above, against, among, before, behind, between, beside, for, from, in, into of, on, over, to, toward, with, without.