Conference Board Projects 3.4% U.S. Pay Increase Budgets for 2026

U.S.-based employers are preparing for 3.4% average pay increase budgets for 2026, the same percentage they actually provided to employees in 2025, according to the results of The Conference Board’s 40th annual Salary Budget Survey, which was released Sept. 3.

The Conference Board report was based on a survey of 460 U.S. compensation leaders across industries, sectors and employer sizes from May 19 to June 20.

For context, last year’s report showed a 3.9% U.S. forecast for 2025, which was less than the 3.8% average actual pay increase for 2024.

The new figures for the U.S. market resemble those found in other recently released salary budget survey reports.

WorldatWork: 3.6% mean salary increase budgets for 2026; 3.7% actual mean increase budgets in 2025.
WTW: 3.5% average salary increase budgets for 2026; 3.5% actual budgets in 2025.
Gallagher: 3.2% to 3.3% average salary increase budgets (job-classification dependent) for 2026; 3.8% to 4.0% actual budgets in 2026.
Payscale: 3.5% average salary increase budgets for 2026; 3.6% actual budgets in 2025.

Same Percentage, New Strategies

While The Conference Board’s 2026 forecast and 2025 actual outlay figures signify a somewhat status-quo environment for total rewards professionals, the underlying story points to some strategy shifts.

The report revealed economic uncertainty is tempering the pace of hiring and salary growth. Given that deceleration, employers appear to be rebalancing their workforce investments with a focus on mission-critical skills and roles, whether those are related to technical skills (e.g., artificial intelligence) or those generating hiring difficulties (e.g., particular roles and skills in the healthcare and construction sectors).

“With turnover slowing, companies are getting more strategic about where their salary dollars go,” said Diana Scott, the research and analysis organization’s U.S. Human Capital Center leader. “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.”

Mitchell Barnes, an economist with the board, added, “Today’s labor market is one of recalibration, not retreat. Companies are rebalancing their workforce and labor strategies — slowing overall headcount growth, targeting high-value skills, and investing in technology and training — to sustain productivity in a slower but still-competitive labor market.”

Delving Into Hiring, Skills and Specific Pay Practices

Several key findings stand out in the new report, including:

Hiring Momentum Has Subsided

Sixty-one percent of survey respondents mentioned U.S. and global economic uncertainty is weighing heavily on their workforce strategies. According to Barnes, most organizations are “taking a step back from general retention [emphases].” As such, expansion hiring and attrition backfill slowed over the previous six months, and temporary layoffs are more frequently transitioning to actual reductions in force. “Overall, salary pressures have eased and companies have become more performance-centric in their workforce plans,” he said.

The ‘Hot Skills’ Trend Is Real

Despite reporting reduced hiring, survey respondents generally said their organizations continue to have solid demand for “hot skills,” with 14% citing expanded hiring for the skills deemed most important for their future. Industries with reported net increases in hiring for key capabilities were: technology (+17%), healthcare (+16%); professional and business services (+13%); and finance, insurance and real estate (+13%). Barnes noted an increased importance for compensation professionals to understand and internalize what their organization values most — now and into the future. “Strategic alignment is critical as human capital leaders work across their organizations to align talent and pay with shifting priorities,” he said.

Automation and Upskilling Make Strides

Thirty percent of survey respondents said their organizations increased their investments in automation in the past six months. The trend was particularly noteworthy in three industries: leisure and entertainment (+40% investment), insurance and real estate (+40%), and technology (+33%). In addition, 16% of respondents said their organizations have expanded initiatives focused on upskilling.

Performance and Incentive Pay Are Prioritized

Survey respondents report they are generally leaning into performance-based compensation strategies. These compensation leaders, particularly those in technology and trade-sensitive industry sectors, are scaling back one-time discretionary pay (e.g., sign-on and retention bonuses). Merit pay increases also are moderating, going from an average of 3.5% in 2024 to 3.0% in 2025. The data showed nonexempt salaried employees are the most impacted by these strategies, as overall total increases were 0.8 percentage points lower in 2025 than in 2024. This possibly points to tighter limits on lower- to mid-level pay growth and a prioritization of critical roles and high-value skills.

‘Other’ Pay Bumps Increasingly Used

Fifty-nine percent of survey respondents said they plan to use “other” budgeted base-pay increases in 2026, an increase over 56% in 2025 and an extension of a recent trend of employers diversifying their compensation strategies. However, fewer respondents said they plan to include promotions (down 4%), external market adjustments (down 3%), and both retention and internal pay equity adjustments (each down 2%) in their approaches.

Divergent Compensation Paths Are Noted

Looking at respondents’ industry representation, manufacturing was the only sector generally projected to expand initiatives related to pay equity and minimum adjustments in 2026. Conversely, those in three sectors (leisure and hospitality; government, nonprofit and education; and wholesale and retail trade) reported general pullbacks in specialized compensation strategies.

(Top-level results from the WorldatWork 2025-2026 Salary Budget Survey report are now available to the general public. The full report — covering base salary increases and merit budgets for 22 countries and in-depth salary budget insights for the U.S., Canada, India and the United Kingdom — is available for purchase. Report purchase also provides access to the U.S./Canada Online Reporting Tool to build customized reports based on industry, organization size and/or geographic area).

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