‘Peanut butter’ pay increases to shrink in 2027

Bringing home the bacon is going to be harder without peanut butter pay. (Forgive us the food references—we’re hungry.)

Only 32% of US companies are planning across-the-board, or “peanut butter”, pay increases next year, a dip from the 36% that said they did this year, according to a recent survey from compensation data company Payscale.

In 2026, merit-based increases are the name of the game: Nine in 10 US companies said that’s the form of pay increase they’re giving to employees.

“We are seeing organizations realize that they need to deploy pay strategically,” Ruth Thomas, Payscale’s chief compensation strategist, told CBS News. “They need to think about business transformation, and part of driving that is allocating pay budgets differently.”

A quarter of respondents felt they were losing talent this year “due to insufficient pay increases,” which might drive the shift away from so-called “peanut butter” pay: “Peanut butter pay can be demotivating to employees as everyone receives the same increase regardless of performance,” the report noted.

But how much? On average, US employers expected to increase salaries by 3.5% in 2027, a slight climb from the 3.4% increase that “employers say they actually gave for pay increases in 2026.” (Headline CPI inflation was 3.5% in the 12 months ending in June, according to the BLS.)

The 3.4% was lower than what employers originally expected to give in 2026: When Payscale polled them in 2025, they predicted they’d give a 3.5% increase this year.

Looking ahead, nearly two-thirds (63%) of companies anticipated salary budgets staying the same in 2027 compared with this year. Meanwhile, 30% of companies expected their salary budgets to increase, while just 8% anticipated lower budgets.

Among organizations with plans to increase budgets in 2027, 30% cited improved economic conditions, while 27% credited “increased competition for labor or [a] labor supply shortage.” For organizations that expected to lower their budgets, a plurality (42%) said they were “concerned about future economic conditions or business performance.”

The Payscale survey polled nearly 1,300 HR and compensation professionals between May and June 2026.