Employers Anticipate ‘Tougher Choices’ for Limited Comp Dollars

On the surface, The Conference Board’s 41st annual Salary Budget Survey report, which was released on Thursday, Sept. 3, projects stability:

• The 338 compensation leaders who participated in the survey forecast 3.5% median salary increase budgets for their organizations in 2027, which closely resembles the 3.4% increase projected for 2026.
• These leaders said they provided 3.5% median salary increases to employees this year, versus a 3.4% median actual for 2025.

The 2027 U.S. projections and 2026 actuals are similar to those found in other recently released salary budget survey reports (see table below). 

Beneath the surface, though, the new report from the independent, nonprofit research organization points out that the road ahead for HR/compensation professionals is likely dotted with work, considerations, decisions and actions.

“Salary budgets may be holding steady, but the compensation landscape is anything but static,” said Diana Scott, the leader of The Conference Board’s U.S. Human Capital Center.

Pursuing ‘The Greatest Impact’ and ‘Future Growth’

The new report stated three factors are coercing U.S. employers to eschew broad-based pay escalation in favor of highly targeted compensation strategies. These are:

• Generally stable labor plans;
• Investments in artificial intelligence (AI) and big bets on its impact; and,
• Greater recognition of the skills employers believe will drive measurable results.

“Employers have to make tougher choices about where limited compensation dollars will have the greatest impact,” Scott said. “The opportunity is to move beyond across-the-board thinking and more deliberately reward performance, critical skills and the capabilities that will drive future growth.”

In examining their workforce plans for 2027:

• 60% of survey respondents anticipated no significant headcount changes;
• 31% anticipated headcount growth; and,
• 9% anticipated reductions.

Headcount stabilization pressures, though, mask largescale work transformation efforts, which are driven by automation, corporate restructuring and selective hiring. As organizations reshape their teams, specific technical capabilities are commanding premium base-pay adjustments. Topping the list are:

• AI skills, cited by 38% of survey respondents;
• Leadership and people management skills, cited by 31%; and,
• Data science and advanced analytics skills, cited by 30%.

For AI in particular, the report stated the technology “is changing what employers value faster than pay systems can adapt.”

While AI skills are commanding a premium, the report also indicated “technical expertise alone isn’t enough.”

“As AI becomes more embedded in how work gets done, organizations also need leaders who can guide teams through change, make sound decisions and translate technology into business results,” said Rita Meyerson, the principal human capital researcher at The Conference Board. “The workforce of the future will require both AI fluency and strong human skills.”

Getting there will take some work. The survey showed the pay and job architectures at many respondents’ organizations aren’t fully set up for transformation:

• As a whole, median merit budgets are projected at 3.1%, while “other” increase budgets are just 0.5%. In general, there is limited room for market adjustments, pay equity, retention and critical skills.
• 63% of respondents still base salary ranges on jobs rather than skills.
• Only 6.0% use “other” increases to reward employees who upskill.
• 3.4% specifically reward hot-skill acquisition.

Aligning Leadership With Business Priorities

Toward compensating executive leaders, the report pegged:

• Median base pay increases at 3.5%, on par with the general employee populace.
• Median annual incentive plan targets at 40% of base pay (for CEOs, the figure is 100%).

To determine executive payouts:

• 79% of respondents said they use financial performance as a prime factor;
• 29% use operational measures; and,
• 23% use strategic or nonfinancial goals.

“With executive salary increases holding steady, incentive pay is becoming an even more important tool for aligning leadership with business priorities,” said JoAnne Moeller, a senior fellow and program director at The Conference Board. “The opportunity is to reward not only financial performance, but measurable progress on productivity, AI investment and workforce transformation — the outcomes that will drive long-term value.”

Actions and Accomplishments

To move holistic compensation strategies forward, with an eye toward 2027, The Conference Board recommended that employers and their HR pros consider five action steps (see table below).

(Top-level results from the WorldatWork 2026-2027 Salary Budget Survey report are now available to the general public. The full report — covering base salary increases and merit budgets for 24 countries/geographic regions and in-depth salary budget insights for the U.S., Canada, India and the United Kingdom — also is now 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.)

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Compensation
• Finance and Budgeting