Key Findings

  • Only 32% of U.S. companies plan to implement across-the-board pay raises for all employees in 2027, down from 36% in 2026, according to a survey released Tuesday by compensation data firm Payscale. More employers plan to allocate their expected salary budget increases toward merit-based raises, as well as promotion increases, cost-of-living adjustments, and pay structure adjustments.
  • Companies on average plan to increase salary budgets by 3.5%, a figure only slightly higher than the 3.4% in 2026. According to the Payscale report, this increase is broadly in line with the inflation rate.
  • The report noted that a total of 63% of companies expect their 2027 salary budget increases to remain flat compared to 2026—however, the number of employers expecting budget increases to rise has increased significantly year over year.

Deeper Analysis

The results of the Payscale survey are broadly consistent with another survey report recently released by WTW, a London-based consulting and brokerage firm. The WTW report found that companies are adopting cautious salary planning strategies, primarily driven by cost management pressures, tight labor market conditions, and inflation concerns. More than one-third of companies reported making strategic adjustments to their compensation plans, including raising salary ranges or providing bonuses and spot awards for key employees.

Similarly, U.S. companies participating in the WTW survey expect salary budgets—the total funds companies set aside for annual employee compensation—to increase by 3.4% in 2027, slightly lower than the actual 3.5% increase in 2026.

In the Payscale report, 63% of companies expect their 2027 salary budget increases to be roughly the same as in 2026. However, among companies expecting their 2027 salary budgets to grow, the 30% figure is 14 percentage points higher than the proportion of companies in last year's report that expected growth in 2026.

Among the reasons companies cited for expected 2027 budget increases, 30% attributed them to improved economic conditions or business performance, 27% pointed to increased labor competition or labor supply shortages, and 24% attributed them to adjustments in compensation philosophy or competitive positioning.

Employee Recruitment and Retention Strategies

According to the Payscale report, although expected salary budgets for 2027 have risen slightly, overall pay increases have moderated since peaking during the COVID-19 pandemic. The report said that before the pandemic, annual raises averaged around 3%, higher than the inflation rate, which hovered around 2%. After the pandemic, both inflation and employee turnover rates surged—a trend dubbed the "Great Resignation"—prompting many employers to introduce retention strategies, including raises that outpaced inflation.

But the report noted that in 2022 and 2023, due to the pandemic's impact on the market, inflation temporarily exceeded wage growth significantly before falling back to a level where the two were roughly balanced. In 2023, annual raises spiked to 4%, then fell to 3.6% in 2024.

The Payscale report stated: "With inflation now on par with wage growth, we are entering a period where employees may be more willing to explore the market and seek new jobs with higher pay."

However, as reflected in the WTW report, companies are also adopting different strategies in how they compensate employees. Payscale's report last year found that 44% of companies planned or considered implementing across-the-board raises regardless of performance—a strategy more common among companies with large numbers of hourly workers.

But according to the report, a quarter of companies also said they were losing talent due to insufficient pay increases in 2026, a trend that may be attributed to such raise strategies. The report said: "'Peanut butter spreading' raises—where everyone gets the same increase—may demotivate employees because everyone receives the same raise regardless of performance."

This may prompt some companies to change strategies, as the report shows that only 36% of companies actually implemented across-the-board raises in 2026, while only 32% plan to do so in 2027.