Compensation Planning: 2026 Forecast

Looking ahead to 2026, many employers have started mapping out their salary budgets, with the prevailing expectation being that salary increases will remain steady.

Recent U.S. market salary budget survey results include:

• WorldatWork: 3.6% projected mean salary increase budgets for 2026; 3.7% actual mean in 2025.
• WTW: 3.5% projected average for 2026; 3.5% actual in 2025.
• Payscale: 3.5% projected average for 2026 (3.7% for non-profits); 3.6% actual in 2025.

Against a backdrop of economic uncertainty, organizations are showing less urgency around retention and talent acquisition than in previous years. This is largely due to employees prioritizing job stability, with fewer actively seeking new opportunities. A recent report by Willis Towers Watson stated, “Fewer organizations this year have found employee stability challenging compared to the past two years. Less than one-third of organizations (30%) report difficulty attracting or retaining employees, representing a decrease of 11 percentage points since 2023.”

The same report also noted, “Three out of five organizations saw their salary budgets change in the last pay cycle. More than half (53%) of these organizations reported no change between their anticipated and actual pay budgets in 2025. For the nearly one-third (31%) of these organizations that are projecting lower salary increase budgets than last year, the most common reasons cited are an anticipated recession or weaker financial results (51%) and concerns related to cost management (45%). Tight labor markets (59%) and inflationary pressures (30%) are the most commonly cited reasons for change among the relatively few organizations that are projecting higher salary increase budgets.”

In response, employers are refining their compensation strategies to remain competitive while addressing inflationary challenges. The report identified the following actions:

• 50% have conducted a company-wide compensation review
• 48% have evaluated pay for targeted employee groups
• 45% have been hiring at higher points within salary ranges
• 40% have raised starting salary ranges
• 43% have increased the use of retention bonuses or spot awards

As 2025 draws to a close, employers are taking a strategic, steady approach to 2026 salary planning. While retention pressures have slightly eased, organizations continue to refine compensation strategies, adjusting pay, revising salary ranges, and using targeted incentives to remain competitive and aligned with evolving business needs. If your organization could use support, we’re here to help! With expertise in market benchmarking, salary structure design, pay equity analysis, and total rewards strategy, please don’t hesitate to reach out - our compensation team is excited to partner with you!