As companies prepare for 2026, a new report from compensation expert Payscale indicates that a significant number, 44%, are opting for “peanut-butter” pay raises—uniform increases across the board—rather than merit-based adjustments. This trend reflects a growing preference for equitable pay increases in an era where budget constraints and concerns over potential bias in performance evaluations are influencing compensation strategies.
According to Payscale’s findings, the average pay increase is projected to hold steady at 3.5% in 2026, the same as in 2025. Despite the prevalence of the peanut-butter approach, nearly half of the organizations surveyed, 48%, still plan to implement performance-based raises, recognizing the importance of differentiating pay based on individual contributions and results.
Ruth Thomas, chief compensation strategist at Payscale, pointed out that the peanut-butter method, while administratively simpler, can demotivate high performers who may feel unappreciated when their efforts are not rewarded accordingly. She noted that companies utilizing this approach can still incentivize top talent through bonuses or promotions, highlighting that base pay is not the only means to attract and retain skilled employees.
This trend of uniform pay raises began to take shape after the Great Recession, as many companies adopted it to manage their limited budgets. With recent financial tightening among businesses, it appears that the peanut-butter approach is resurging as a practical solution for adjusting wages.
In a noteworthy revelation, smaller businesses—those with fewer than 100 employees—are offering higher average pay increases of 4%, as opposed to the 3% raises planed by larger firms with upward of 10,000 employees. This strategy is seen as a move to attract talent in a competitive job market, as smaller employers may have more flexibility in their compensation practices.
Industry-specific trends also show promising insights: sectors like construction, agencies, and technology are providing above-average raises, with construction leading at a 5% increase, addressing the labor shortage in that field. As younger generations, especially Gen Z, express a desire for stable and resilient job opportunities less likely to be impacted by automation, many are gravitating towards blue-collar professions, which are perceived to offer more durability amid the evolving job landscape.
Overall, while the trend towards across-the-board raises may discourage some high performers, the strategic use of bonuses and the differential pay based on industry needs provide a balanced approach to compensation. It offers hope for employees who may benefit from increased investment in sectors promising growth and stability, thereby enhancing job attractiveness amid widespread changes in the labor market.