American employees hoping for a standard pay increase next year may largely be disappointed, according to new research from Payscale.
The firm found that only 32% are planning for a “peanut butter” raise—or a standard, across-the-board increase—in 2027, compared to 36% that handed out such increases this year.
“Peanut butter” pay, researchers say in the report on Payscale’s Salary Budget Survey, was a “defining trend” heading into 2026 but “appears to be losing momentum.”
“Peanut butter pay may be losing some of its spread, but it hasn’t disappeared,” said Ruth Thomas, chief compensation strategist at Payscale, in a press statement. “Organizations appear to be moving toward more thoughtful and differentiated compensation strategies—which is critical to attracting and retaining talent. When compensation budgets are limited, treating every employee the same feels simple and fair, but it can also fail to recognize the people, skills and contributions that are most critical to the business.”
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As peanut butter pay increases become less common, merit increases are picking up speed. About 89% of those surveyed say this is their most common type of pay increase, followed by promotional increases and salary structure increases.
The shift away from broad-stroke increases doesn’t mean hikes won’t happen, but rather employers are being more intentional about how increases are allocated.
The survey found the average total base-pay increase is expected to rise 3.5%, compared to 3.4% this year. The “slight improvement,” Payscale says, remains about in line with inflation—“meaning many employees may experience little meaningful growth.”
More than one-quarter say they are losing talent this year because of insufficient pay increases, while another quarter aren’t sure if their pay practices are affecting turnover.
A more optimistic financial picture
Overall, growing confidence in economic conditions is shaping the pay increase landscape. In fact, according to the survey, optimism about business performance largely outweighed economic uncertainty among survey respondents.
“A notable 30% of organizations in the United States anticipate a salary increase budget that is higher than last year—a substantial improvement from just 16% the year prior,” researchers say. Just 8% of U.S.-based organizations expect lower salary increase budgets.
Of those that expect a higher salary increase budget next year, 30% cite increased economic or business performance as the driver, followed by increased competition for talent.
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