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2026 Pay Raise Budgets in Corporate America

In the midst of ongoing economic uncertainty, workers in the United States can find solace in new findings released by The Conference Board. The organization's recent survey points to a steady outlook for pay raises in 2026, projecting average salary budgets to remain around 3.4%. This marks a continuation of the trends observed in 2025, where similar budget increases were reported.

The report’s findings come from a comprehensive study conducted between May 19 and June 20, capturing insights from over 460 compensation leaders across various industries. Notably, it highlights that despite a cautious approach, the resilience of pay budgets is a small victory for employees navigating a fluctuating economic landscape.

Key Survey Highlights

The survey revealed several significant points:

1. Stable Salary Budgets: The expected salary budget increase is on par with the previous year, reflecting a growing tendency among companies to maintain compensation levels despite economic pressures. The median increase remains steady at 3.5%, which, while lower than the previously anticipated 4%, still exceeds the 3% average seen before 2020.

2. Focus on Performance-Based Pay: Organizations are increasingly leaning towards performance-based compensation strategies. While one-time payments such as sign-on and retention bonuses are becoming less common—especially in technology and sectors sensitive to trade—merit-based pay growth sees a slight decline from 3.5% to 3.0%.

3. Hiring Momentum Slows: Economic uncertainty is cited by 61% of companies as a constraint on their workforce strategies. Employers report a slowdown in both new hiring and replacing departing employees in recent months; this trend hints at a more conservative approach to labor expansion.

4. Shift Towards Critical Skills: Although hiring has generally cooled, demand for specific high-demand skills, often referred to as “hot skills,” remains strong. Companies are focusing their resources on critical roles, particularly in technology, healthcare, and finance sectors.

5. Growing Use of 'Other' Base Pay: The adoption of diversified base-pay strategies appears to be on the rise. Projections indicate a move from 56% to 59% for the inclusion of various budgeted base-pay increases. Conversely, fewer employers plan to offer promotions or make external market adjustments, illustrating a recalibration in compensation strategies.

Adapting to Economic Conditions

The current economic environment is characterized by uncertainty, prompting companies to recalibrate their workforce and pay strategies rather than retreating. Diana Scott, the US Human Capital Center Leader at The Conference Board, notes that with hiring slowing, organizations are becoming more strategic about how they allocate salary funds. This shift is evident in a concentrated effort on roles that significantly impact company objectives.

Mitchell Barnes, an economist at The Conference Board, emphasizes that this labor market is about recalibrating rather than withdrawing. Companies are streamlining their efforts to focus on essential skills and training that sustain productivity, even as growth in overall headcount slows.

Conclusion

While the overall pay raise budgets for 2026 appear stable, the nuances of hiring strategies and compensation approaches signal a labor market in transition. The concerted focus on performance and critical skills aligns with the economic realities facing businesses today. As organizations navigate this complex landscape, employees may find reassurance in noticeable investments aimed at sustaining growth and productivity in their respective fields.