Dive Brief:
- Pay raise budgets for next year are predicted to mirror 2025’s increases, according to a Sept. 3 report from The Conference Board. On average, companies said they plan to up their salary budgets by 3.4% in 2026.
- Actual increases this year were on average 3.4%, lower than the 4% predicted in last year’s survey but still higher than the 3% average seen prior to 2020, The Conference Board said.
- “Today’s labor market is one of recalibration, not retreat,” Mitchell Barnes, an economist at The Conference Board, said in a news release. “Companies are rebalancing their workforce and labor strategies,” slowing headcount growth and investing in training, Barnes noted.
Dive Insight:
While economic uncertainty is affecting the pace of hiring and salary growth, companies are focusing their investments on critical skills and positions, the report found.
“With turnover slowing, companies are getting more strategic about where their salary dollars go. Rather than spreading increases across the board, they’re channeling budgets into roles and skills that really move the needle — like critical capabilities and internal upskilling,” Diana Scott, U.S. Human Capital Center leader at The Conference Board, said in a news release.
The Conference Board’s findings echo that of other recent reports. August data from compensation vendor Payscale showed that U.S. salary budget increases are expected to stay at 3.5% in 2026, down 0.1% from 2025. Likewise, a July report from global advisory firm WTW found that most U.S. employers plan to maintain their salary budgets in 2026, with flat increases of 3.5%, aligned with actual increases seen in 2025.
Companies are turning to performance and incentive pay, The Conference Board report found, and moving away from one-time discretionary pay, such as sign-on and retention bonuses, and merit-based pay.
Of the more than 460 U.S. compensation leaders surveyed, 59% said they plan to use “other” budgeted base-pay increases next year, up from 56% in 2025. This marks a continued trend of businesses trying to diversify their compensation strategies, The Conference Board said.
At the same time, the use of promotions, external market adjustments and internal pay equity adjustments all are expected to decline, the report found.
